thoughts on radio, music, technology and change

14 March 2011

"If public media is to secure its future, it must be with the public."

SUMMARY

This paper presents a set of ideas for reforming both the online service models and the internal business methods of the public media system to allow it to adapt fully to the age of Internet media and digital distribution. It is timely because if fully realized it has the potential to more than replace all federal funding and make the public media system completely independent of political pressure.

It was written in 2010 as a response to the challenge of digital media and circulated privately to about 20 system leaders for comment and discussion. I'm posting an updated version on the Pubradio email list and my blog now because it has taken on added relevance in light of the current politically-motivated efforts to defund public broadcasting. The plan described here could render this potential loss of income irrelevant by replacing it with greatly expanded user support.

It proposes the creation of a national public radio/public media membership program, tied to a massively aggregated, personalizable online content distribution system that can deliver all public media content both at large network sites like NPR.org and PBS.org AND simultaneously to every station site, as well as those of potential affiliates, partners and supporters, and individual users on blogs and social networks.

Full access to the online system by end users and tangible support of the public media mission are the premium benefits of national membership, but all levels of engagement would be supported with various tiers of service.

The existing "channel conflict" between the stations and NPR (i.e. multiple competing delivery channels to the end user) is resolved by phasing in a rational revenue-sharing system that benefits all networks, stations, producers and affiliates appropriately, and gives all stakeholders positive incentives to work cooperatively for a successful outcome.

The philosophical "mission conflict" between free and paid services is also analyzed, and some nuanced solutions are described. I argue that "freemium" Internet business models are applicable to public media and will help it to grow and secure its future as a fully independent entity.

Finally, I identify some of the strategic and business advantages of aggregation — both of public media content and digital services, and of a "super-community" of public media users via a national membership that supports the overall public media mission itself.

I use the terms public radio and public media somewhat interchangeably. Public television could, and I believe should, be included in an integrated national membership + service concept. Joint licensees already bridge this 20th century media division by definition, and the trend toward native mixed-media formats online continues to erode this increasingly outdated distinction between media types.

I believe the time has come to speak openly about the "3rd rail" policy and money issues we have avoided for years. While the proposal may seem radical in scope, I believe it is both appropriate for today's media environment and completely practical, while grounded in the historic values of the public media system.

I apologize for the length. When you are re-imagining the core business relationships of an entire industry, you're obliged be as clear as possible and to touch all the salient points.

The key ideas are summarized below in outline form. Whether these ideas intrigue you or disturb you, strike you as wise or heretical, I hope you will consider the proposal and offer specific criticisms for public discussion.

1. Re-define the role and identity of stations as "locally-focused public media network nodes."

2. Extend the Public Media Platform to every station web site as a matter of system policy, so all public media content is available at every point of entry to the network. This can be as elegant as a single Public Media Player on mobiles or the web, or a full service embedded "site-within-a-site."

3. Re-align the financial relationships and incentives between networks, stations, content producers and affiliates so everyone has a stake in the success of the network as a whole.

4. Define a practical set of revenue-sharing policies between stations, networks, producers and affiliates. (For example: ultimately stations might not pay dues and program fees to NPR, but receive a net revenue share from it.)

FOR THE PUBLIC

5. Create a comprehensive set of free, voluntary and paid digital service models for the public as a means of attracting significant new revenue for the system.

6. Create a national Public Media Network membership for end users, with multiple tiers of service and access to premium digital services and archival content as benefits of paid membership.

Since the arrival of practical Internet streaming in 1995 there has been endless discussion of the merits and demerits of various service plans and business models by which the public radio system could modernize itself for the multi-platform, multi-media world now arriving in all its glory. The Station Resource Group's landmark Grow the Audience report In January 2010 defined the issues and problems with clarity, set goals, and called for renewed systemwide cooperation to achieve them.

Yet the biggest roadblock to realizing the system's online potential was barely mentioned:

The public radio system's ability to respond to the digital challenge is handicapped by its legacy business relationships — most critically, between the stations and NPR.

I'm referring broadly to the existing political power blocs, business rules, products and services by which the three major public radio networks and the stations inter-operate. Some of them go back to 1970 and the formation of NPR; they evolved and matured into the current system during the 1980s and '90s, and despite the arrival of the Internet have remained largely static since.

This has caused what's known in the media business as a "channel conflict"— the networks and stations are economically co-dependent, but their long-term interests have drifted out of alignment during the Internet era because service is no longer geographically limited and there are now multiple delivery "channels" and services available to the end user.

On the one hand this pits the stations against the networks in a battle neither can win; on the other, it paralyzes real innovation by restricting the creation of new services and delivery options that would better serve the public and the public media mission.

With a handful of conspicuous exceptions, everyone in the system still operates mostly on their own with no common goals beyond the mission-level concept of public service and keeping the lights on at home. Rugged individualism: it's the American way, right?

In this case, wrong — or at least, inadequate. I believe that the traditional network/station business relationships are ultimately responsible for stifling necessary innovation online, and that there are rational and effective ways to both unblock the current stalemate and create positive incentives for change. With these innovations come a rich set of possibilities for major advances to service, user engagement, and system revenue.

CREATIVE DISRUPTION

Innovation-related issues like these are problems for mature industries facing "disruptive technologies" like the Internet, and were very effectively analyzed in 1997 by Harvard Professor Clayton Christensen in his book The Innovator's Dilemma. Christensen's ideas have been presented to public radio executives at conferences for many years, yet aside from general agreement that something needs to be done about this digital thing, little has changed in terms of core business practices or public-facing services once you get past the easy stuff.

What progress has been made has been limited to relatively easy, non-controversial, and largely technical innovations in podcasting, metadata (PBS Core), program auditioning and distribution (PRX and ContentDepot), modular web content distribution (NPR, Public Interactive) and most recently, public APIs (Application Programming Interfaces) leading to the Public Media Platform (a joint project of NPR, PRI, APM, PRX, and PBS) — along with ongoing collaborative efforts at program and news production.

This has largely been the story of the last ten years for public radio; veteran station manager Jon Schwartz summarized the issues elegantly on April 13, 2010 in a post titled "Challenge for Public Radio Stations" and subsequent posts on the Pubradio mailing list. (*There is no public archive for this private email list. With Jon's permission I've included a link to his post here .)

Many of you have contributed to these developments. Yea, They Are Good, Brothers and Sisters. But they are not going to be good enough. That's what Jon Schwartz was worried about and deep down, you know he's right.

Public discussions about new media strategies often degenerate into complaints about the cost/benefit equation for digital services. Todd Mundt's April 16th 2010 post on the PRPD blog takes a step beyond this and argues that this is where the audiences are and are going, and we have no choice but to follow them and "invest in digital platforms." He's right of course, but could this attitude be any more passive and reactive? It's going to take a lot more positive commitment than that to achieve real success with digital services.

Despite admirable progress at NPR to address some of these issues under the technically progressive management of Vivian Schiller (R.I.P. 3.09.11) and Kinsey Wilson, NPR still operates from a defensive position as it tries to innovate effectively online while dodging a constant stream of suspicion and criticism from stations. Alan Chartock's Pubradio post complaining about "in-program promotion of the NPR website" following Vivian and Kinsey's reply to Jon Schwartz last April is a typical example, as were Vivian's somewhat defensive comments at the 2010 D8 conference.

THE STATION PROBLEM

Station fears about the future are fueled by the persistence of "broadcast thinking" — a last-generation, zero-sum game played in a limited universe where for one player to win, another must lose. Clearly, in public broadcasting it's the stations who are most directly challenged by the existence of new digital networks. But the long term threat is from distribution technologies and media competitors who didn't exist ten years ago, along with the fast-changing habits and expectations of end users — not from other players within the public radio system.

Add to the business challenges inherent in a federated system like public radio with a station-controlled central network (NPR) the native issue of disintermediation the Internet creates for all legacy 20th century media businesses in the middle of the distribution chain (stations) and you have a recipe for very slow going and inadequate response during a period of unprecedented disruption, innovation and change in the media ecology. Pile on the possibility of CPB defunding and there's a lot for stations to worry about.

Let's just say it: "The station problem" (as it's been called) will never be resolved online without substantial changes to the way business is done between the principal stakeholders in public radio. Thankfully, we don't need some magical new "business model" to achieve this — there are plenty of them already. But they must be revised, developed and adapted to suit the new conditions:

We need new business policies that incentivize collaboration network-wide, so stations, networks and content producers all have a clear motive to participate, and a fair share in the financial success of the whole system.

For real success in the burgeoning digital ecosystem, we need a world-class online offering grounded in our core values, focused on public media content and fully comparable or superior to the best efforts of the BBC, commercial broadcasters, leading webcasters, and online news providers.

And to take advantage of social network effects and achieve Internet "scale" we need to aggregate our scattered supporters into a "super-community."

While over the air broadcasting is responsible for the bulk of current system revenues and online related revenues are still small, it should be obvious by now that no entrenched media organization can ignore the Internet "disruption." As Todd Mundt points out, this is where future audiences, growth and revenue are going to be, and we need both strategic and tactical planning to respond effectively.

THE ZEN OF DIGITAL NETWORKS

It's not just that it would be easier and more desirable if everybody in the system pulled together.

The tactical question for public media is how to adapt and change a system that was built for the monopoly era of local broadcasting and closed program distribution networks, and redesign it for the international scale, platform and format expansion, content abundance, audience fragmentation, and usage paradigms of the Internet era.

The digital listener/viewer/end user now has many other choices, and technology companies like Apple and Google that cater to them have the power to change how media is distributed and consumed in a few short years. (Facebook launched 2004; YouTube launched 2005; Twitter launched 2006.) As everyone has now realized, public media has no choice but to embrace the rules of this environment.

As the "meta-network," the Internet is setting the pace and much of the agenda. We have to adapt our culture and values to it — an easier task, but one made harder because broadcasting will remain a technically more efficient (though feature-limited) platform for large scale audio distribution for years to come, and will therefore coexist with Internet distribution and various hybrid solutions for a long time. But we are already living in a multi-media, multi-platform world, and the burning challenge for all legacy media is how to manage the transition.

If the requirement for the future is to be fully competitive with other major Internet media sites, the intrinsic nature of digital networks and the services they breed require a coherent brand identity, service model, value proposition and digital-network-level interaction with the public.

Lacking any long-range system evolution or transition plan, NPR (in cooperation with several other national organizations) has been obliged to try to fill the breach in these areas.

From its inception as a broadcast network, NPR has had a national audience. In the era of syndication via tape and later satellite, it had a minor international presence as well. On the net, NPR.org instantly had an international presence, just as other major media organizations like CNN, the BBC, the CBC, etc. Even niche web services like our Hearts of Space Archive now reach listeners and subscribers on every continent but Antarctica.

Digital networks have already ripped the lid off the limitations of broadcasting. With its global, interactive, on-demand, mixed-media capability, the Internet is a different order of network, and public media must respond appropriately or risk slow, inevitable decline. So what's appropriate?

PERSONALIZATION and BRANDING CONFLICTS

In traditional broadcasting, listeners and viewers are anonymous. Public stations have spent a lifetime trying to overcome this because converting the anonymous listener to a known supporter is critical for their financial survival.

Online the listener's location can be roughly defined by their IP address. If they create an account or register their identity with a digital service, the service can be personalized. It's taken 15 years, but most online users are now comfortable with the idea of registering with a site and submitting an email address to receive a more convenient, focused and personalized "user experience." Getting to "who are you?" has become much easier and more common online than it can ever be for radio or television, especially in the age of social networks.

The channel conflict problem for public broadcasting actually began with network-created programming. As a practical matter, from the start both NPR and PBS had no choice but to brand themselves as the source of the major programs they produced. It was standard broadcast practice; they could not know where their broadcast listener was located and had to establish direct feedback loops for comment. So listeners and viewers were gradually educated to understand the difference between local and network level content, which came to co-exist on most stations.

In the broadcast era the station was the sole point of contact with the listener. It wrapped its own branding under and around NPR programs and other network-sourced content. Listeners to these programs therefore developed a relationship with both the station and the network. If they related strongly to a particular NPR program, they might be more likely to weight the relationship toward the program itself, or perhaps to NPR as the source, but the loyalty relationship became more complex and unpredictable.

Online the problem is worse, because NPR also provides much of the digital delivery infrastructure and branding is visual as well as audible. As a result, when the plea is made for an NPR.org user to support their local station, the result is often confusion — especially in cities with multiple stations. NPR has made heroic efforts to square the circle here, but the request to financially support the local station makes little sense to purely digital users of NPR.org or NPR-distributed podcasts on iTunes: they are a "national" user, relating to a national media entity or program via a ubiquitous digital access technology.

Because of its pre-eminent programs, massive listenership, pervasive branding and advanced web site, online NPR.org will naturally tend to become one of the major points of contact with public media users, while the station will of course remain the point of contact for traditional broadcast listeners and a smaller number of online listeners looking for locally-focused content.

But the full potential of any digital public media service (or any complex web-based service) cannot be realized without personalization, which at minimum requires registration and a user account.

NPR has recognized this with its "NPR Community" feature, which now reportedly has 500,000 members. Stations may look at this as a Trojan horse; it immediately raises the issue of where and how the membership contribution will be handled. And without the kind of fundamental business policy changes I am advocating, it indeed has the potential to exacerbate the station/network channel conflict.

Today NPR sends users back to their local stations to donate, but it would be far better for the business relationships inthe system to accommodate user engagement at any level, and allow digital services to take their natural form in scope, reach, inventory and usage.

TOUCHING THE 3RD RAIL

Online, the public media system must conform to the user's expectations, which have been and will increasingly be shaped by the rest of the online environment. Stations can continue to complain about network dominance in digital services, but

Online the battle for the user was lost from the start because the direct-to-user relationship is embedded in the ubiquitous nature of the digital network itself.

In practice, the program or subject matter is typically more important to the user than the delivery vehicle, whether network or station. They want their Morning Edition and All Things Considered, their Fresh Air and This American Life, and they care how it gets to them...not so much. Endless repetition of the network brand has had also its effect, along with confusion over the complex structure of the public radio network, all of which have escalated the long-simmering "bypass" issue: the network vs. station relationship with the user.

In the digital era, the solution to the "bypass" problem is not to attempt to enforce legacy rules that lock down the relationship with the end user at the station level, but to redesign the way listener, underwriting, government and institutional revenues are distributed within a more integrated public media system.

This idea lands squarely on the "3rd rail" issue of system politics — who owns the user? — and scares the crap out of stations. Better to deal with the devils you know than consider such sweeping revisions to how the system operates on a business level. And in a world of declining revenues, it's always easier to simply cut staff or services to make it through the fiscal year.

To this fear I argue that for both practical and business reasons, it will be less painful and far more productive to pursue the course of internal business policy revision than either maintaining the status quo or pursuing dreams of greater external funding.

Say what? Yes, bizarre as it sounds after the recent salvo of defunding attacks from conservative Republicans, in the last five years there were actually some efforts to lobby Congress to "fully fund public media" by the Free Press and others. It was a longshot before and is almost laughable now. Moreover, in today's extreme economic and political environment, it is highly unlikely that any of the other sources of public media funding — foundation grants, institutional support or underwriting revenue — can be dramatically increased. For all these reasons —

If public media is to secure its future, it must be with the public.

THE PUBLIC MEDIA PLATFORM

One way to mitigate the tendency for the large public media network site or sites to dominate online usage would be to create a digital content distribution system that allows stations to offer everything that NPR.org and the other public media networks offer on their own web sites. This is the tantalizing vision offered by the Public Media Platform now being built.

But even when this platform is operational and content is widely shared, there will still be a struggle over where the user is "monetized" with a membership or donation, how national underwriting is handled, and where the money goes. This leads to the key business proposition of this paper:

In a fully developed digital public media system, it should make no difference whether a membership transaction occurs at a national or local entity or affiliate, OR whether usage occurs live or on-demand, over the air, via a local station web site, any mobile device, a podcast download, via NPR.org, or the sites or services of any other partner organization.

The membership supports the mission of the public media system as a whole —including all networks, stations, content producers, affiliates, sites and services.

THE PUBLIC MEDIA "SUPER-COMMUNITY"

Perhaps more significant in the long term

National membership defines and aggregates a new "super-community" of public media users and supporters.

Today the most sacred business possession of any station is its membership database. To suggest pooling all memberships into a national super-group is therefore the deepest heresy, but that is what will be required to achieve real success on a location-indifferent (but still nationally focused) digital network.

By incentivizing membership in this meta-group and pooling existing members to start (i.e., if you are a member of a station, you would automatically become a national member with a defined class of benefits) public media gains the broadest possible financial base and business possibilities for the future, and positions itself to enjoy all the advantages of other emerging social networks, rather than atomizing its users into thousands of smaller groups.

Online media is shaping up as another battle of giants, but this time it will be dominated by technology and software companies, especially platform and ecosystem service providers like Apple, Google, Amazon, Microsoft, Verizon, AT&T, and Comcast — not the large content providers and broadcast networks who ruled late 20th century broadcast media.

By creating its own digital content distribution and monetization platform — an expanded, public-facing version of the PMP (let's pray it has a better acronym) and aggregating its loyal users into a super-community, public media will be in the best possible position to sustain itself in the digital ecosystem. Legendary Internet entrepreneur Mike Homer (Apple, Netscape, AOL, Kontiki, Open Media Network) made this exact point to us before his untimely death: "Online there is no reason for Public Media not to operate its own platform."

The harder question is how to achieve this. In mature industries with complex interrelationships, the process of change is necessarily disruptive and complex; Clayton Christiansen's research shows that focusing on optimizing the core service itself is the best way to avoid being sandbagged by entrenched stakeholders and discover the path to the future.

AGGREGATION REQUIRED

The key is aggregation of users, content, and platform resources.

Think about the 20 biggest or most frequently used web sites you visit. I'm willing to bet that 19 of them have aggregated something into a workable "meta-application" that delivers a valuable product or service you could not access at all before, or could not pull together yourself without a lot of work. (I'm not referring to the kind of opportunistic content aggregation practiced by parasitical news sites, though the fact of their popularity proves my point.)

The power of aggregation is many-sided: content, convenience, cost, usage, audience size, longevity, and increased possibilities for underwriting, user engagement and community-based network effects are just the main benefits. Online, size still matters. Yet at the same time, the extreme efficiency and low marginal cost of online distribution allows previously uneconomical small services to survive and prosper modestly, and in the case of public media, to maximize public service.

Whether the aggregation is URLs on Google, social contacts on Facebook, professional contacts on LinkedIn, classified ads on Craig's List, short messages on Twitter, popular music on Pandora, photos on Flickr, videos on YouTube, or the contents of everyone's garage on Ebay — to be successful at scale online you have to aggregate something into a practical service, and you have to make it easy and fulfilling to use.

Aggregation power and the user experience are the alpha and omega of web service value.

BUSINESS MODELS

Online business models are intimately related to the online service models they monetize. 20th century public broadcasting had to think about these issues at its inception in the 1960s and 70s; online we have to think about them again, as they are still in a formative state.

For a network of stations that depend on voluntary user contributions for more than 50% of their revenue on average, it's astonishing that public broadcasting has accepted that only a minor fraction of its users (famously but arguably 9 to 11%) will actually pay for the service when asked.

Worse, the old messages about the "uniqueness of this kind of broadcasting" increasingly do not apply. There's plenty of other public media content out there, along with vastly increasing amounts of distracting audio and video and news content that complicate and atomize the patterns of media consumption.

While free-to-air local delivery made the voluntary support model inevitable, Internet delivery of radio and television programming (like the cable systems that established the practice) opens up the possibility of a more diverse set of service models with a range of price/value relationships — so-called "tiers of service" — free, underwritten, paid voluntarily, and premium paid memberships or subscriptions with additional benefits.

On the web these tiered business/service models are called "freemium." Wired editor Chris Anderson wrote a book about it in 2009 called Free: The Future of a Radical Price. This business strategy is remarkably similar to public broadcasting: the free (usually ad-supported) service attracts all the interested users, who are upsold a membership or subscription with some kind of benefit, or cross-sold a related product or service. This often gets rid of the ads, or on public broadcasting, would eliminate the fundraising pleas.

But here the strategies diverge: before streaming, public stations gave away their service and were obliged to ask for voluntary support from geographically limited audiences. Online, users can be anywhere, levels of service can be open or limited as matter of design and policy, and those who chose to pay for premium levels of service partially underwrite the cost of providing the free service to the others. (I say partially because NPR and public stations as well as other not-for-profit and commercial media entities often have multiple revenue streams.)

SERVICE MODELS

The post-Internet service model issue is that even with its last remaining content monopoly — audio news and information — public radio still does not offer a comprehensive, massively aggregated, tiered online service to end users. What we have instead is an ad hoc system which forces users to interact with multiple sites, accept a lower level of service on the air and on less developed station sites, or — for a minority of net-savvy users — allows the public to harvest a chaotic crop of free online services with much more effort.

This is obviously not an optimal experience for users, but the most damaging consequence of the situation is that by failing to offer a comprehensive, integrated, user-focused service online, public media is missing the biggest opportunity since it was created to adapt and secure its future in the digital world.

For public radio and all of public media it comes down to how to provide a higher level of user value online, and get back increased financial support.

Whether this support is voluntary or "priced-in" is a matter of policy and how the public media mission is interpreted. Branding issues, Internet delivery economics, and the the need for personalization all argue that tying higher levels of online service to some kind of national system-level membership is both desirable and necessary; but even if this solution is not adopted, at the very least the goal should be to increase the percentage of users that support the system financially well beyond the current levels.

When I describe an aggregated public media service to average end users as "An expanded, personalized one-stop service for all public radio/video/mixed media content — all shows, all episodes, all archives, and all related services, all available to you on every connected device wherever you are" — everyone says the same thing:

"Sure, I would pay for that. It would be worth it."

This is a rough description the BBC iPlayer for BBC content. It would also describe a public-facing version of the Public Media Platform that is now being created via the technical device of a "public API" that opens up access to public media content to approved partners under a simplified set of licensing rules. Former NPR CEO Vivian Schiller had begun to talk about this in interviews (D|All Things Digital; Wired; Vimeo.com; Nieman Lab).

What I am advocating here is a strategy for monetizing this platform long term that is consistent with the realities of 21st century digital networks, cognizant of the long-term needs of public media stakeholders, and not hobbled by business disincentives or funding limitations.

WHAT USERS WANT

Here we get to the heart of the "user value proposition" for the post-Internet era: to get people to support public media service financially — whether voluntarily or by any kind of fee for service — you must aggregate and package much more value in one place than 20th century stations ever could, while making it almost as easy to use as conventional radio and television.

Instead we have a kind of online chaos in public media. There are hundreds of free live streams and an increasing amount of on-demand content on almost a thousand different web sites, all with different user interfaces and partial or overlapping collections of content. Specific content requires a generic search engine to find. If found, it's often confusing and inconvenient to use. Browsing can be difficult and "discovery" of related content is very limited, when it should be a core design goal of an effective system.

To help, there are embedded recommendations, plus some software tools and directory sites that aggregate links to the many source sites and arrange them in a somewhat more convenient user interface. There's PublicRadioFan.com, a free online link-farm for public radio; there's the Public Radio Player iPhone app, which allows users to hear a selection of national shows and local station streams from around the system. No doubt the PMP will move the ball forward another notch. Isn't that enough?

Perhaps for some. Efforts now underway to centralize national underwriting for buyers and syndicate it to stations may ultimately be able to support these balkanized services remaining free indefinitely. Clearly, this is less than ideal for users; but in my view the biggest problem with the limited service, partially aggregated status quo is that it fails to harvest all the goodwill and financial support possible from public media's users for the benefit of the system as a whole.

From the end user's point of view, you want what NPR.org has stopped just short of becoming: a single user interface to all public radio/interactive media content, that knows who you are, greets you like a friend, supports relevant social relationships, knows what you value, and gives it to you when, where and how you like best.

This is an updated version of the public media "portal" concept that Mark Fuerst and others proposed around 2004. Whatever your position on the merits of the idea, it failed to gain traction in public radio because of opposition by stations, who saw (and continue to see) the growth of NPR.org or any national aggregator as the worst kind of disintermediation: competition from within the family.

THE THEOLOGICAL PROBLEM: MISSION CONFLICT

The most intractable inhibiting prejudice to the creation of any premium fee-for-service plan is what Dennis Haarsager memorably called "the theological problem" — the idea that to be "mission-authentic," public service content must be free.

This belief is a kind of purism, a creed that's proving increasingly difficult to adapt to the complex, multivalent world we actually live in. It is the source of "mission conflict" when applied to digital services.

Without a doubt, free service is a core value of public media — as long as you can pay the cost of providing it, and the overall mission of the network and its component entities can be sustained. Ideological advocates of free service tend to overlook the fact that once you get past conventional broadcast delivery, NPR.org and a handful of major station web sites, the level of free service begins to decline rapidly due to funding, personnel and infrastructure limitations. The PMP will help this, but

What we really need long-term is a sustainable, independent service that is not vulnerable to political manipulation nor starved for revenue and forced to operate below its potential — a plausible description of the status quo.

A more subtle kind of tradeoff occurs when substantial amounts of advertising or underwriting are required to support free service: these include revenue shortfalls, some loss of editorial freedom, aesthetic and ideological objections to commercial promotions, and narrowing of the difference between public and commercial broadcasters. Public television today increasingly exemplifies these compromises.

STATION IDENTITY IN THE DIGITAL NETWORK ERA

If you accept the premise that aggregated, personalized free and paid online services to massive numbers of geographically distributed end users is the natural long-term evolution of the move to digital — how does public media get from here to there? How can the conflicting interests of hundreds of stations and other institutions of widely different size, financial power, community values and cultures be integrated into an expanded, user-focused service model?

Fully developing and integrating public media network assets into a single platform, membership pool and multi-faceted service does not mean that stations would become less relevant, less important, or in any way subservient to NPR or the other national networks. But they will have to evolve: online, every station web site has the potential to be an entry point to the entire world of public media. This new online benefit of national membership is what stations would be promoting in addition to their local services.

Historically, most NPR stations gained a key part of their identity and relevance from their association with their public radio source networks and national programs, while adding localization and listener interaction to the overall cultural "signal" they send to their communities. This critical set of programming choices and local activities remains under station control in a more integrated system, but can be greatly expanded in scope, reach, inventory, and usage in the digital network era as broadcast limitations are left behind.

If we redefine the station as a "locally-focused public media network node" that retains a transmitter for free local service, it is still 100% responsible for its public personality, programming mix and editorial voice, while its inventory of network content and the reach and "findability" of its own content are greatly expanded through its affiliation with a powerful engine for distribution, delivery and monetization of digital media to and from its network partners and end users.

As intelligent nodes on the public media network, stations are no longer constrained by the scarcities of broadcasting. They can be part of the NPR/Public Media brand identity AND enjoy a far less limited presence for their own programming.

It's a two-way relationship: the station web site is itself a gateway to the larger network, and the station is also an active node that can create programming, interactive presence, "eyes on the ground" news coverage, social and cultural reporting for the network. This two-way relationship is one of the unique strengths of the federated public radio network, and while we use it today for routine news reporting and special projects, it can be considerably extended to all kinds of digital content.

Vivian Schiller and many others have observed that this powerful combination — a group of strong central content-creation and distribution networks tightly integrated with hundreds of intelligent local nodes working together to optimize service to the end user — is the key asset that public media should be leveraging aggressively to secure its rightful place in the digital future.

REDESIGNING THE BUSINESS

All well and good in theory, but today stations and networks are still locked into an increasingly archaic rivalry.

The limiting issues are money and the end-user relationship. Stations battle any attempt to pull listeners away from their brand on-air or online, while NPR and the other content creation networks are constrained in their ability to follow digital network service models to their logical conclusion. As a result,

The only effective solution to "who owns the end user?" is the whole system.

In practice this means that it should not matter if a user's point of interaction with the system OR their membership is at the local or national level, with a content provider, an intermediary, or a distribution network: the membership revenue would be shared between the network and the local nodes via an equitable system that accounts for their respective contributions to acquiring that revenue.

The same concept can be applied to some other sources of system revenue. As members of a revenue-sharing system, stations ultimately could also benefit financially from their share of of underwriting, endowment, global syndication and any other high-level revenues.

I realize these ideas will sound absurd or heretical to traditionalists as they virtually flip established practice on its head. The revenue-sharing policies will take care and time to define. If you are skeptical about this, recall that it took many years and much negotiation for the system to create the business policies and practices that underlie the current public media economy. Clearly a plan like this would have to be phased in intelligently over a number of years.

But consider the downside of the status quo:

NOT reforming the underlying business relationships will continue to inhibit significant progress online.

NOT creating a truly competitive service online means that revenue, audience share and public service will be eroded as other media entities, unburdened by these restrictions, compete with public media entities online for attention, services, and underwriting/advertising dollars. If this sounds far-fetched in the current climate of slightly rising on-the-air radio listenership, recall that it has already happened to public television on the cable networks.

NOT reforming virtually guarantees that public media will not capture its share of the support dollars of Gen X and Y and other empowered digital natives.

NOT creating an unshackled system will mean that whatever partial or incoherent service mix ultimately emerges out of the current slouch toward digital Bethlehem will be a shadow of what might have been, and a once-in-50-years opportunity to establish a more substantial public revenue base for public media will have been lost.

NOT becoming fully independent of Federal government funding puts the journalistic independence of public media news at risk and threatens the weakest in the system.

REVENUE PROJECTIONS

The plan I've outlined above depends on offering a premium web service via both network and station portals to end users who are willing to pay for unrestricted access with their memberships. Yes, this is "mission heresy," but before you object, let's do the math:

With only 250,000 new members paying $10/month ($120 per year, $35 a year less than Sirius/XM), the system would pull in almost $30 MILLION in new revenue every year.

With 1,000,000 new national members, revenue rises to $120 MILLION every year.

With 3,000,000 national members at this level, we're into serious money: $360 MILLION in digital revenue every year from this source alone — exclusive of national and regional underwriting, which can be greatly increased in such a system. That's more than the Kroc bequest and far beyond the $100 million or so the public radio system currently receives each year from CPB.

As you can see, the revenue multiplies very quickly due to the recurring nature of the transaction.

For you mission purists: think about the kind of free public services can be offered with this level of funding.

Sirius/XM already has over 20 million subscribers paying 30% more than this each year. Some public media users say they would be willing to pay more. Does anyone doubt that public media as a whole can do far better when the call is to support the entire system?

CONCLUSION

The fundamental reason to build a comprehensive aggregated online service is to be able to serve the public better than any of the existing delivery options. In that respect, all these ideas are "mission-positive."

With this kind of service comes the opportunity aggregate sufficient resources to remain competitive with the large players in the burgeoning digital media ecosystem, and to secure new revenue for the entire public media system. But this requires revising the current station-network business relationship to unblock innovation and provide the necessary incentives via a fair revenue-sharing system that benefits networks, stations, content producers and affiliates appropriately.

I celebrate its history and its romance, but we have to leave behind the isolated "radio station" metaphor and its geographically limited, preformatted service-for-some, along with the current chaotic welter of multiple web sites, user interfaces, content and programming, and

To address the native issues of online service models directly via a tiered, system-level membership program with real benefits.

To optimize service online we must maintain user profiles, and provide users what they want, when and how they want it.

To optimize revenue for the system, we must maintain user accounts linked to online payment gateways for episodic and recurring transactions: credit cards, PayPal, Google Checkout, and any newly emerging forms of online transaction processing.

The goal is a comprehensive, tiered public media service that serves the end user the way they like best, on any screen or digital platform, wherever they are. In practice this means a range of interactivity, from passive listening on fully programmed channels, to customized on-demand service, to intensive interaction for high level user requirements.

This multi-level service model implies that both traditional stations and the large network portals reconfigure themselves around the end user's needs and preferences, and continue to serve existing broadcast listening habits while fully supporting next-generation patterns of media engagement.

I do not underestimate the difficulty of realizing the kind of changes I call for here. We are now moving constructively toward many of the supporting standards and distribution technologies necessary to deliver it; but without corresponding innovations in the way we do business — both among ourselves and the public — we will never enjoy the full potential of the digital network revolution.

I recognize that station managers in particular have every right to be skeptical of theoretical income projections for unbuilt and untested types of service, and will be reluctant to give up policies that, though limited, uncertain or declining, are still delivering operating revenue for them.

No one can fully answer these objections. I hope I've made the case that the lack of positive revenue associated with public media online operations to date is due to their lack of a unified vision and incoherent, disaggregated, haphazard deployment. Build a service that offers all this and leverages the extraordinary goodwill the system receives from its users, and it will be a very different story.

Much will depend on how and how well the ideas I have presented here are executed and delivered in the form of timely, practical user-facing services. In particular, the many issues surrounding revenue-sharing policies promise to consume every ounce of shared mission commitment and cooperation before they are resolved. And a project of this scope and magnitude will still have to be phased in very carefully over a number of years, with transition funding to prevent financial disruption to marginal stakeholders.

Yes, it's daunting and unpredictable, but there is one thing I can say with absolute certainty: If we don't create these policies, build these services and try them, we will never know.

My thanks to those who reviewed earlier drafts of this paper and contributed ideas and criticism. To those who didn't respond and still resist confronting these issues: Please don't wait until we're burning the furniture. Now's the time.

:: SH

Stephen Hill is producer and host of the nationally syndicated ambient music program Hearts of Space. He was the 5th employee of KQED-FM, San Francisco in 1971 and has been an independent producer since 1973. The national program launched in 1983 and is still heard on over 200 public stations. From 1984 to 2001 he was president and producer of the independent record label Hearts of Space Records. In 2001 after the arrival of practical internet streaming, he launched an early subscription streaming service, the Hearts of Space Archive, which experience has provided most of the insights in this paper. He blogs at Spatial Relations.

Your otherwise thorough treatment of the pros and cons of Apple's new in-app subscription system left out one very important, even critical issue and exaggerated a minor one.

Sharing of user names and email addresses is not, as your earlier post explicitly stated, just a matter of protecting users from sale of their contact info to junk-mail companies. To say that is to argue from the most obnoxious, lowest-level case of what can be done with user data.

It's more instructive to look at the relationship between the subscriber and the publisher or service provider. In 20th century broadcasting and non-subscription publishing it was typically an anonymous one. Analog Radio, TV, movie ticket buyers and daily newsstand users were never known to the broadcaster, theater owner, or publisher. (Public radio and TV were an odd exception, but even there only 10% of the users became members.)

In a non-interactive world, this was arguably a sufficient level of intimacy for what was typically designed to be a lowest-common-denominator relationship in terms of programming the broadcast schedule or editing the content bundle of the newspaper.

In this paradigm, subscriptions — whether to periodicals, paid media services like cable TV or even specialty content like porn — were uniquely valued not only for the recurring revenue, but because the user was known to the publisher/service provider.

If the product was good enough, the relationship was extended and secondary marketing efforts could be directed at the subscriber. These included all kinds of discounts, special offers, loyalty programs and optional extensions to the basic service. All these programs were designed to optimize, extend, and leverage the long-term value of a subscriber.

What has changed these old subscription paradigms forever is the almost effortless interactivity of the web and mobile applications, as well as the ability to support niche content by subscription.

Once it was clear that personalization was key to optimizing the online user's experience, most web services asked users to identify themselves and create an account. This not only allowed customization of the site's setup and content to the individual user, it enabled a previously unattainable level of secondary features and benefits, including ratings and rankings, recommendations, user reviews, user-specific data and the entire panorama of social network features and benefits.

We run a niche music subscription streaming service with a typical "freemium" stack of free and paid levels of engagement. We are not so worried about whether the 30% platform and processing fee Apple is mandating can be accommodated — though it would force us to raise our subscription prices. What most concerns us is that we absolutely must know who our user is and what they doing on our service, whether we or a 3rd party are handling the billing transaction.

The mechanics of this are critical. When Apple charges for a new subscription and integrates the authentication of the user for our app with their existing iTunes password (I'm assuming this because I haven't studied the API in detail) that allows the user to access our protected content via the app. But unless Apple provides us with tracking data for that user that is equivalent to what we get with our current system, we have no idea who they are. We are back to serving an anonymous user, who logs in using their Apple ID, rather than one we can see.

It gets worse. We also offer a Flash-based web app which predates our iOS app, and that requires a user account and sign in. Today a single subscription, email address ID and password allows the user to access our service both via the web and on their iOS device.

Under Apple's new conditions, a user would need an additional account and password to use our web app, while their Apple account would allow them to use our iOS app. A subscriber to our web service creates a trail of user data that allows us to view their account and deal with support and billing issues, but we see would nothing for the iOS-only user unless 1) the user opts in to share their data with us and 2) Apple decides we should see it via their API.

So the iOS-only subscriber is essentially a citizen of Apple's ecosystem and isolated there. This sucks, both for us and for the user. They would have to maintain two accounts — one for the web with us, and one for iOS with Apple. We would have to make post-facto efforts to integrate our existing account and usage data with whatever Apple in their wisdom decides to reveal to us.

A user who pays a premium for subscription to our content has a right to expect that they will be able to use it on every platform we support, but unless Apple opens up all the data about the history of our subscriber and makes it available to us via their API, we have no idea what's happening and the user is painted into a corner.

Long term I don't see how this is going to work unless Apple creates an ecosystem that really supports the relationship between publishers, service providers and the end user — and Apple as the hardware, platform and transaction provider.

If Apple is going to muscle itself into the value chain for subscriptions, it's going to need to do a much better job of it.

16 September 2010

Another season has arrived, and with it another round of discussion of the burning issues facing my colleagues in Public Radio.

They have noticed that the mobile space has gone nuclear in the wake of the iPhone's arrival three years ago, and are wondering how to respond to that.

To be fair, there is quite a bit of activity around mobile service across the public radio network. There are over 130 "public radio" apps available in the app store, and NPR continues to lead as much as it can by creating a public API to expose its content to stations and other legitimate partners, and by moving toward open source tools that can be widely shared.

PRX has turned itself into an impressive developer with the Public Radio Player app. Try it and experience what public media aggregation could be like. In one place you have access over 500 network and station streams, many of the national programs, and over 1,000 on-demand archive programs. They've also done the This American Life app, and another for WBUR Boston.

There are a number of blogs for and by public radio people, but the private PUBRADIO mailing list remains the best way I know of getting the word out across all parts of the system. I virtually lived on PUBRADIO in the late 1990s when it started; I've drifted away over the years due to other responsibilities, but continue to archive the posts and check in every few weeks to see what's going on. Once and awhile I will join a discussion, which is what this post is about.

Three weeks ago the Pubradio list took on the subject of mobile bandwidth and the demise of unlimited data plans on the AT&T network in a thread called "WOW-Can you afford Mobile Internet Streaming?"

The initial example was extreme: 4 hours a day of streaming 192kbps! Nobody does that, especially over 3G (it wouldn't even be possible over the older Edge data network). Another used the figure of 8 hours a day of listening to compare mobile radio unfavorably to over the air broadcasting. There was lots of fear and loathing, discussion of the technical flaws in streaming. along with some chest-beating about the value of radio and the sanctity of the public radio mission.

The arguments against mobile radio listening were technical, financial, aesthetic (didn't like ear buds), idealist and populist: it's a platform for rich people, it doesn't reach many rural areas, etc. One commenter even compared a connected smart phone to a transistor radio, as if radio listening was all you could do on your smartphone.

The real issue and the underlying fear was whether mobile streaming would replace conventional radio broadcasting. This question was answered decisively by Skip Pizzi and a group of experts he interviewed in a briefing paper published by the Station Resource Group (SRG) in June. It's available as a PDF here.

Cooler heads eventually prevailed. Jake Shapiro of PRX reminded everyone of Skip Pizzi's conclusions: we are entering a multi-media, multi-platform world and we really have no choice but to get used to it.

I got to the discussion late and posted this:

The issue of mobile bandwidth limitations is a short-term fear, not a long-term problem.

There are many excellent reasons why mobile bandwidth and service dependability will be increasing steadily during the next phase of IP communications. Even before the arrival of video streaming, the same argument was made for the desktop web 15 years ago in the wake of color graphics and audio downloads, which it was feared would "overload the Internet."

ISPs responded by simply building more capacity into their networks and adjusting their business models to recover those costs. Today the standard of desktop service is flat rate unlimited plans and few consumers give it a second thought. The mobile data carriers are now going through the same evolution on their networks. Five years from now we will not be worrying about this.

What I'm missing in this "inside radio" discussion is a focus on the listener and the user experience. I think the distinction offered by Richard Paul in this thread is going to be increasingly important: "the weight that one (listener) places on their desire for a broad experience with lots of choice or a narrow and curated one." Clearly public radio service falls on the narrow/curated side of that equation -- what are the likely limitations and opportunities related to that?

As connectivity and bandwidth constraints are ameliorated, the culture of listeners/viewers will be steadily changing, and they will be asking for (more like demanding) more service options and better user experiences on their burgeoning digital platforms, whether fixed or mobile, wireless or hard-wired.

This is already our experience as an online service provider, and is the most important reason why I believe stations should heed Jake Shapiro, Dale Spear and Skip Pizzi's advice and create unique, high-value and/or locally focused web content, or become unique value-added aggregators of content and services.

At same time stations will need to get good at establishing their content and services on all relevant platforms: broadcast, wired IP, wireless IP, and any emerging hybrids of broadcast and Internet.

Smartphones, apps and radio chips will all have role to play, but increasingly, no single software, hardware, network or delivery technology will dominate the fragmented service mix. The "agile integrator" will have the best chance of thriving in this environment.

That ended the discussion. A few weeks passed and I got an email from AT&T trying to be reassuring about their commitment to expanding their network:

"I am writing to thank you for choosing AT&T for your wireless service, and to update you on exciting plans we have to make your wireless experience even better.

You already know that AT&T covers 97% of all Americans. And as an AT&T customer, you have access to the nation's fastest mobile broadband network; a mobile broadband network that allows you to talk and browse the web at the same time; and seamless access to over 20,000 AT&T Wi-Fi hotspots - more than any other U.S. wireless provider.

But you may not know the extent of our plans to improve your experience. In 2010 alone, we plan to invest between $18 and $19 billion in our wireless and wireline networks across the country. In fact, we've invested more in our networks over the last three years than any of our U.S. competitors. We've already upgraded our cell sites to enable faster mobile broadband speeds when paired with expanded backhaul, and we plan a similar upgrade at the end of the year that will enable even faster speeds.

We're not stopping there. We are also adding thousands of new cell sites, expanding mobile broadband coverage to millions of customers, installing enhanced fiber backhaul, and increasing the capacity of our data network. Not only do these enhancements provide a better experience today, but they also enable a seamless migration to our next generation of mobile broadband - LTE.

What this means to you is simple: better coverage where it matters most, and fast access to information on the go."

OK, it's corporate PR, but $18/19 billion is, in Everett Dirkson's immortal words, "some real money." So I posted the message to the list with the subject "For those still skeptical about mobile bandwidth" and added:

While there are no guarantees, this kind of rapid evolution and intense competition in the telecommunications and computer industries usually means steadily declining prices for end users. I would not want to bet against mobile streaming of both audio and video becoming increasingly common in this environment.

To my surprise, this provoked another round of grousing about cost, data limits, coverage, and even "effective use of bandwidth and energy consumption" vs. conventional broadcasting. I thought we'd settled the issue — apparently not. I wrote this summation. So far, no pushback.

I posted this notice to make the point that the cellular carriers were committed to building out their networks to provide for the additional demand that is now arriving in the wake of a new wave of IP-equipped mobile devices of all kinds.

To argue that this is irrelevant to public broadcasters either by invoking the core public radio service mission, or from an engineering efficiency perspective is to miss the impact of these developments and the opportunity they represent. It is also wrong to infer that I said it will become "a 100% replacement of traditional wireless." I neither said this nor implied it, nor do I believe it will be the case.

What we are seeing here is another historic connectivity rollout, similar to wired broadband but with different restrictions and dynamics: spectrum is limited, more expensive, and more regulated than on the wired networks, so the expansion will be slower. There is intense political and economic pressure on the FCC to open up these limitations and allow the market forces to assert themselves, as well as intense competition between providers like AT&T and Verizon.

At the same time, both the hardware and especially the software of mobile devices is evolving at 'Internet speed' and there is no question that this will both disrupt and further complicate the already daunting landscape of media, information and entertainment.

As Skip Pizzi has written very persuasively in both an SRG Report and in recent Radio Ink articles, wireless IP networks are not going to replace *either* wired broadband OR over-the-air transmissions anytime soon. Instead, we will have a complex and constantly evolving media environment with multiple delivery technologies, formats and pathways.

These rationalizations also miss the fact that mobile IP service itself is 'interactive' and therefore not in the same class as non-interactive broadcasting. It is on-demand, personalized, diverse, non-local, and altogether less limited.

Interactive services breed interactive users, QED. And while these users overlap the current public media user base, they are also younger and more "engaged" and therefore represent the audiences of the future.

I would also reverse the elitist and financial arguments and suggest that those who are willing to pay for advanced cell phones and data plans are more likely to be willing to support quality content providers like public radio networks, stations, and producers, whether by voluntary contributions or fees for service, and therefore represent the members of the future.

Because every connected smart phone is effectively "the Internet in your pocket" they already have an overall utility to the user far beyond simple media consumption which will drive adoption. Based on experience in other countries with more advanced mobile networks, these trends are unstoppable. Therefore public broadcasters need to embrace and adapt, not look for reasons to delay taking their rightful place on interactive networks.

Thus the conclusion I suggested in my original post a few weeks ago:

...stations will need to get good at establishing their content and services on all relevant platforms: broadcast, wired IP, wireless IP, and any emerging hybrids of broadcast and Internet.

Smartphones, apps and radio chips will all have role to play, but increasingly, no single software, hardware, network or delivery technology will dominate the fragmented service mix. The "agile integrator" will have the best chance of thriving in this environment.

16 April 2010

In the previous post Jon Schwartz calls the question I reproduced a 'polite indictment' of the public radio system from one of its most respected executives. Jon manages a network of stations in Wyoming, and is therefore most concerned with the fate of stations in the network era. I'm responding to him by summarizing ideas that I've previously expressed here in more detail, especially in Growing the Network.

When deep insiders like Jon Schwartz are calling for systemic change, you know the time has come. Either it will happen...or the opportunity will be lost and public media will settle into a mature state of limited relevance. That would be a shame; it's not as if we haven't had the time and the opportunity to make the transition.

Jon,

I applaud your effort to raise once again these issues and put them into a more comprehensive context — historically, financially and 'ecologically' in terms of today's media and interactive media environment.

You and I have talked about these issues in the past. Since 2004 I've been calling for exactly the kind of fearless, grounded, strategic and business innovation you ask for. Perhaps it is my liminal position in the public media system, but my questions and observations on this subject have mostly been greeted with silence or denial. That tells me I'm close to the core of the problem: people are too threatened by this kind of change even to talk about it.

I too am impressed by what Kinsey Wilson is doing at NPR to move things forward on a technical and collaborative level. He is doing everything he can, but as a technology executive he is not able to address the underlying structural and political issues. Stating them falls somewhere between seditious and heretical:

The business relationship between stations (a 20th century broadcast artifact), networks (a larger, overarching, expanding concept of information systems), and producers (now 'content providers,' programmers and 'interaction designers'') MUST be redefined for the 21st century network era.

Critically, what is required to move forward is an across-the-board revenue sharing business model that welds the financial and organizational objectives of stations, networks and producers into a common goal: engagement and impact on local, national, and global scales, and a sustainable revenue stream to support public media long term. This is exactly the area you identify as problematic. Avoiding the issue isn't going to fix it.

You mention 'online aggregation' in your opening sentence, and indeed this is the other crux of the matter: to be successful online you have to aggregate something into a comprehensible, easy-to-use, valuable service.

Public media's timid, partial, and largely disorganized approach to its online presence is not only unsustainable on a cost over revenue basis: strategically it is a recipe for failure in both the short and the long term. You and a few others excluded, public media executives handicapped by history and the legacy structure of the industry have simply been incapable of thinking comprehensively and organizing to address the problem.

As an outsider with insider knowledge who has already made the transition from 20th century broadcast syndicator to 21st century online music service provider, I can make the following prescription:

Public Radio (and the rest of public media) needs to —

recognize that the native online format is interactive mixed media, not "radio" or "television"

offer 'end users' an integrated multi-platform service with massive aggregation of local, national, international, cultural
and public service content, and relevant social network features

create a national membership program with free and paid tiers of service.

Structurally, it must create —

a platform for underwriters, national funders, content producers, and end users

a business model which shares revenue equitably between the principal stakeholders: producers, stations, and networks — thereby eliminating the political stalemate that has inhibited effective change thus far.

You will know something significant is happening when all the stakeholders I've mentioned are sitting in a room together ready to re-invent, re-design and re-negotiate the prevailing business models of public media and commit to a new system.

Yes, it's a big deal, but anything less than this is just more inspirational/aspirational rhetoric. The real work is building sustainable services with business rules that incentivize all the participants, offer the public a higher level of service, and result in new revenues for public media.

15 April 2010

JON SCHWARTZ has been in Public Radio longer than I have, and that's a goodly number of years. While I've pursued an independent producer's course and created a succession of small businesses, Jon has worked his way into the executive level of Public Radio.

He's been the General Manager at Wyoming Public Radio for many years, VP and board member at Western States Public Radio, a board member of PRIMA-Public Radio in Mid-America, and a member and past chairman of the NPR board of directors. In other words Jon is an active, respected member of the public radio establishment.

If you've read this blog you know I'm an outspoken critic of the way public radio has moved into the Internet era. It's one thing for me to bitch about this issue, quite another for Jon Schwartz. Last week he rattled off the following "memo" on the Pubradio email list. It is nothing less than an (polite) indictment of the status quo from one of the most patient, thoughtful and professional members of the system — and in that respect it is quite extraordinary. With Jon's permission, I am reproducing it here. In the next post, I'll comment on what I think should be done about it.

Colleagues,

Topics in this memo include online aggregation of viewers; online content and identity; ROI and online business models.

Lately we see more and more studies, proposals, critiques, analyses, grant announcements, and policy papers focusing on so-called public media and its future. We observe the unending transformations driven by the public's embrace of internet platforms for information, entertainment and engagement with one another. Our stations and organizations have made hesitant and then faster-paced investments in new media. We understand that internet-mediated platforms are rapidly becoming as influential in our cultural and political lives as the traditional media ever was. We accept - some grudgingly - that if public broadcasters intend to have the same or greater influence in and public service for our nation as we have had in broadcasting, we and our successors must reinvent public broadcasting on established and emerging internet platforms. But what about the specific future and role of public radio STATIONS?

The future of "public radio" or "public broadcasting" in the internet space is a broader topic than the specific future facing individual public radio stations. Stations face disaggregation online, after enjoying decades of the power of national audience aggregation. Stations have become a tremendous and irreplaceable asset in the local/national partnership. Stations deliver the hugely successful broadcast service that serves over 30 million Americans each week. It is clear that today, whatever local/national partnerships might exist online, they do not resemble the broadcast model. The original basis for strong partnerships in broadcasting are lacking at present: powerful, significant national programming in quantity coupled with an essential, monopolized distribution model locally. Clearly, the fruits of on-air success have not translated to the online space. What is less clear is what kind of local/national partnership will pertain in the future online.

Our broadcast space and its established programming, fundraising practices, and audience dynamics are different to the online space. The path by which public radio grew bears recalling: from scattered independent small stations into a national news giant now supported largely by private, voluntary support. These stations formerly had little identity as a collective entity, practically no national significance despite a number of dedicated and often locally successful stations, and unsurprisingly not a lot of financial assets. The investment by the Corporation for Public Broadcasting in NPR and its nightly news magazine All Things Considered was transformational. Nearly overnight a national audience was aggregated as the separate radio stations around the country began airing the same show at the same time. Something each station could not do on its own became possible to accomplish together. NPR could sell and deliver underwriting as a national buy, generating a tremendous new revenue stream to help support the highest quality news on the dial. Stations could insert their own news and information within the national show, gaining them an audience they had not previously enjoyed. That larger audience permitted stations to sell underwriting as well, to augment more and more successful direct audience fundraising. The advent of Morning Edition turbocharged public radio stations and NPR. The power of aggregation and powerful content was astonishing.

In the online space, our stations resemble "educational radio" and the pre-ATC days. A PMM February survey of 70 public radio and TV station websites revealed that the average number of visits per visitor over the entire month was 1.76. Less than twice per month! Imagine if this were a measure of the public's use of our broadcasts! We would be dead in the water. Even so, if all public radio stations' web traffic were combined today with NPR's own web traffic, public radio online would overnight rank among the largest leaders in news providers online. Fortunately, industry leaders are today working to at least have our stations' and our national networks' traffic available as an aggregate number. This may begin to attract the attention of online advertisers more seriously than we have ever seen. Without these, we lack the connections and nodes with which to begin a virtuous cycle of essential content, traffic, and non-subsidized, non-governmental financial contributions and sales.

Of course there won't be a direct web analog of ATC or Morning Edition on our websites to create a national impact and identity, underwriting and fundraising vehicle. That's not the nature of web content. Nevertheless we ought never to forget that public radio's extraordinary success rests on accomplishing together important things of local and national impact that none of us could have done alone. Can we once again create and distribute together content that will aggregate and inspire significant audiences, but this time online? Kinsey Wilson and his staff at NPR are working towards this goal. The upcoming re-launch of Public Interactive should help stations. The NPR API/Public Media Platform may become the means by which stations and national organizations and perhaps one day newer, non-broadcast non-profit entities that share our values may begin to forge an online nationally recognized identity and a set of new, modernized relationships that define just what we are on-line. The CPB has recently announced two major initiatives, Local Journalism Centers and the Public Media Platform. All of these efforts promise to increase the likelihood that powerful content and capabilities specific to the web will enrich all our sites and our services to internet platforms. Will it be enough? Will the public view the results with the same passion and support with which they have embraced public radio on the air? More subtly, will the public recognize as important a presence online that we now think of as "public radio"? Without the elements of our shared broadcast identity such Morning Edition, a similar sound on the air, place on the dial, and all the rest - just what will forge an identity for "public media"?

Part of the answers to the issues of aggregation, content and identity are certainly related to another major issue that confronts stations and national providers: money. A business plan. Minnesota Public Radio is certainly one of the biggest investors and leaders in innovation and content on the web. However MPR's Jon McTaggart reported at a national conference that his organization's ROI - return on investment was not much more than 30 cents on the dollar. We all feel that pain, every day. We know we need to dedicate time and money online, staff and content and technology to forge ahead if we are to create public service online that is comparable to our impact on-air. Yet we know that we are turning dollars into pennies online, even as the public's use of the internet soars. Online advertising revenues surpassed radio advertising revenues for the first time last year. We must see a path to sustainability in order to commit the management focus and financial investment required for online success. But managers and consultants quietly wonder whether success online can bring sustainable financial success. We must ask whether a traditional medium's revenues can both sustain itself and feed the demands of the online space? Grants can fund specific projects, but they hardly constitute a sustainable operating budget for this entirely new medium and its associated enterprises. Like oil, government money is still flowing, but there isn't as much of as there once was, and demand for it is growing by leaps and bounds.

We are energized by projects announced and proposals floated for innovative initiatives. Many managers remain wary. In difficult economic times we must place our bets carefully. We must be more insightful about whether and which projects may lead towards a future in which online enterprises begin to support themselves. We must ask how that would come about, and what projects are simultaneously being initiated that will test means of support. After years of effort in the online, we need to know that the funders and those proposing new media projects possess and share a vision that includes not only laudable individual projects but an emerging blueprint wherein these projects lead to a coherent and plausible virtuous cycle - not over a financial cliff. We need clarity that developing content and technologies will enrich not just one organization but will spread across our system in ways that build public media values and identity that we share; that will make a significant impact and contribution for the American public; and will generate sufficient support from individuals and businesses in addition to priming the old grants pump.

In short, we need substantive clear strategic planning, not just hope.

18 January 2010

NOTE: I wrote this at the invitation of Skip Pizzi for a report by the SRG (Station Resource Group) in August 2009. I've since made minor additions and corrections, but it is substantially unchanged.

What public radio needs most to support new media is not just disconnected projects or specific new media initiatives in news, music or network infrastructure. It needs a comprehensive platform to provide the technical and business infrastructure for network-wide services. A small fraction of this is already in place, but much more would have to be done to effect real change.

To support new media comprehensively, the system needs a new business structure that financially incentivizes and underwrites collaborative aggregation and new media development for the key supply side participants: content producers, stations, and networks.

At the same time it must drastically up-level the online user's experience with public radio sites, provide appropriate mechanisms for direct user involvement, and provide the tools to raise significant new revenue to be distributed among the system participants via a revenue sharing business model.

Implementation

Key elements needed to make this happen:

Further development of NPR.org as a master portal to all public radio content and archives (i.e. massive, comprehensive content aggregation);

Further development of NPR.org as a platform via both private and public APIs and shared services to enable any level of content syndication, transaction of payments for syndicated content, and sharing of end user payments and contributions;

Further development of user services under the "NPR Community" concept, including applicable social network features;

A set of revenue sharing policies to distribute syndication, membership and underwriting income among producers, stations and networks;A national membership program which allows end users to sign up either at NPR.org OR at any station, with the ability to route additional contributions to the entity of their choice.

When I have made the argument for business model reform to concerned members of the public radio establishment in the past, with few exceptions these ideas have been met by denial or disengagement. But no one has ever actually argued against them, except by avoiding the issues I raise. That's a pretty good indication I'm cutting close to the bone and have identified one of the key issues in the "innovator's dilemma" as applied to the public radio system.

(Ironically, Clayton Christiansen's description of the typical
reasons for the "Innovator's Dilemma" don't apply to public
broadcasting, in that making the necessary business model
changes would neither work against the interests of existing customers
OR reduce existing revenues with a lower-priced product. The dilemma here is the need to redesign the power relationships and business rules in the system.)

The recommendations of SRG's original "Grow the Audience" report (with the partial exception of the first one, which cites the obvious need for "organized and ongoing support for stations in developing strategic clarity about their roles in the online and mobile networked environment") as well as previous system-centric attempts at gazing into the future — are mostly bland reiterations of the core values of the public media catechism (diversity, service, inclusiveness, community, etc.), cautiously extending a toe outside the box while continuing to view the world from inside it.

This approach cannot work, because innovation is not needed at the level of the public radio value system. Nor will modest, incremental online innovations be sufficient.

What is needed is a new set of incentives and structural relationships between the major elements of the system and the audience that will enable and fuel an expanded set of digital services with their own logical business models.

By looking at online and mobile networks only as a new distribution channel into which the old public radio network and station political and economic structure must somehow be fit, the system has consistently missed the revolutionary nature of the new developments, wasted money on overlapping and partial investments online, and failed to capture the share of online attention the quality of its content deserves. NPR.org should be a U.S. top 100 site: instead it ranks 324th in the U.S. and 1,178th globally.

Worst of all in my view, it has so far completely missed the new revenue opportunities that the digital network era can and should provide. For all these reasons, the policy of "incremental adaptation" has been a qualified failure, and will continue to fail to deliver the true promise of the network age.

In fact, the "Grow The Audience" slogan itself is both too obvious (of course you want to grow the audience — every media producer wants that) and too narrow — you don't just want to grow the audience. You want to grow service and revenue as well, and create a technical and financial platform for public media in the 21st century.

So rather than tinkering with the low-hanging fruit among the opportunities that digital networks present to public broadcasters (so far: metadata standards, podcasting, APIs and other shared technical network resources, modular content syndication, and special collaborative projects), public media and public radio needs to restructure its core business models for the benefit all stakeholders.

Current Public Media Business Models

A federated hub and branch system of not-for-profit organizations with three central networks (NPR, PRI, APM) feeding programming and services to a diverse group of independent stations with a wide range of economic circumstances.

Stations pay the central networks and independent producers for syndicated programming (aka content) based on market size and other variables.

Central networks’ business models also include tax-based support grants from CPB, grants from public and private foundations, corporate and institutional underwriting, and returns on endowment investments, in addition to station dues.

The fact that the elements of this system are now over 50 years old and the current version at least 30 years old should tell you that it is at least time to take another look at the structural underpinnings of the public media system.

Digital Axioms

I take the following to be axiomatic when discussing the opportunities provided by ubiquitous digital networks:

End users win. Power moves from the core to the edges. End users, formerly known as listeners and viewers, gain the ability to choose from an unprecedented range of options, and to express those choices at will.

Content originators win by the ability to reach end users directly, without the gate-keeping and editorial functions previously exercised by intermediaries like network distributors and broadcast stations, and by the real prospect of universal access to all levels of content.

Content aggregators win by the extreme convenience of "one-stop" interactivity, users’ preference for minimizing the number of sites they have to deal with, and economies of scale.

Intermediaries tend to lose. They are "dis-intermediated" — rendered unnecessary by both direct network access to content, and by user preference for more comprehensive services and more refined user experiences. Local stations are most at risk in the new order and must find new ways to justify their existence.

Content scarcity is replaced by content abundance, along with a new set of abundance-related issues. Unlike broadcasting, bandwidth is effectively infinite, and there is no practical limit or shortage of content. The focus shifts to finding desired content via search, rankings, tags, recommendations, shared links and other network-native strategies employed directly by the end user.

Massive content aggregation is the only way to provide a broadly competitive service in the network era. This does not imply that NPR.org or PBS.org would make stations irrelevant. Public media's federated network/station structure is ideal for delivering an aggregated service from multiple "points of presence" on the network.

To meet the varying needs and desires of end users, a substantial number of customizable tiered service options, payment models, and total cost of service need to be supported. The closest model for this today are large cable TV services; online services can and should be more granular.

National memberships should be encouraged at both the network aggregator level and the local service (station) level, for the benefit of the entire system. This is where the new revenue is going to come from, but the proceeds must be shared. In fact...

Fair and transparent revenue sharing is the future of most online media. Public radio can lead in this because of its mission, history, and existing federated structure. Payments for content can flow in all directions, not just from stations to the central networks and producers. For example, in some cases NPR could underwrite or even pay stations to carry its content in order to extend the total reach of the network.

Payments to content providers should be proportional to actual usage, with minimums where necessary. Unlike broadcasting, it is possible to account for all uses of network delivered digital content. Producers should have a share in the revenue generated by unusually popular content.

These ideas are only a starting point. Building out the new relationships will require vision, commitment, and flexibility from all stakeholders, with one guiding principle:

05 December 2009

This was cool enough to get me blogging again. Bob Lefsetz on the Lala sale here, FYI. My take on some of the implications:

LALA

I've been using lala.com for almost a year, and incredibly impressed with the sophistication of the service and the slick operation of the website. In the absence of a U.S. version of Spotify, Lala had the most advanced music streaming site, with, believe it or not, more functionality than the current iTunes desktop app.

Now imagine subscribing to the iTunes store (in addition to buying downloads) and being able to stream anything they offer wherever you are, in addition to having access to your entire existing iTunes collection on any browser or compatible mobile platform.

Apple could become your primary media vendor for music, video, movies, podcasts, and oh yeah...apps, games, multimedia periodicals (eBooks?) — one-stop shopping for all but the most rarified niches and foreign media.

The point about Spotify being more advanced I believe is because they use a P2P distribution engine plus conventional unicast streaming. In addition to its own data centers, Apple currently uses a conventional large CDN (Akamai) for some of its file, image and stream serving.

REINVENTING DIGITAL MEDIA: iTUNES LP & iTUNES EXTRAS

This doesn't sound like a big deal yet, give it a few years and a couple of Steve Jobs product launches and you might be hearing about it. Without much publicity, Apple just released two new digital multimedia interactive 'container' formats with support for UI features and navigation: iTunes LP — for digital music albums — can include any mix of text, music, video, images, interviews, links, etc.

iTunes LP— for digital music albums — can include any mix of text, music, video, images, interviews, links, etc.

I just met an Apple in-house developer who worked on these products and was told that (at least to start) Apple will be the final assembly point for iTunes LP and Extras releases; they are building an online input platform for content creators to upload the components, which will then be assembled, reviewed by Apple to insure compliance to format standards, copyright, and perhaps? some moral standards to exclude porn, and released via the iTunes Store.

This is sure to cause another Apple übercontrol shitstorm in the blogosphere when it gets around. It will also insure a now typical Apple-quality user experience and product rollout. So you give and you get.

Personally...the world may be going back to singles, but I've been waiting almost 10 years for a practical digital album format. So I'm happy to work with it, especially if it can be streamed on the HOS music service.

I think the days of the traditional San Francisco startup approach are numbered. It’ll be flushed down the drain along with CDO’s and zero-down mortgages.

On the other side we’ll have a world where having a price will be the expected. A world where Jason (of 37signals) can’t make headlines saying “free is not the future”. A simpler world where most people, even on the web, will live from direct customers.

That has indeed been our experience with the Hearts of Space online service. To be sure, we were in a relatively unique position to launch a subscription model streaming service in 2001: we had a national presence on public radio, we had an established and well-accepted brand, and we had an inventory of unique, high quality programming to offer.

But the fact is, we had no choice. No one was going to give us any kind of funding, and our traffic numbers made any thought of advertising support a fantasy.

That said, it has taken us a long time to understand the value calculation that users make when deciding whether to pay. We have found that the entire area is very nuanced, and the relationship between free, paid, and "freemium" models takes careful experimentation to get right. We wound up with 3 major levels of service and no less than 25 different pricing options! (see PLANS at www.hos.com)

Despite what must be a record number of payment options for a site our size, we continue to be surprised by the granularity of service that users ask for. Ultimately we may need to build an interface that allows users to pick service levels and payment options from a menu and construct a 100% custom solution for themselves, like Apple or Dell does with their hardware.

We have concluded that it is not up to us to tell our users how to interact with us or how to pay for our content.

We've found you need to pack your service with value from the start, drive the price down as far as you can, keep adding value, innovate, repeat. Once you are rolling, daily interaction with your users will teach you everything else you need to know to get it right.

03 April 2009

As the global economic crisis deepens, the curtain is drawn back to reveal the roots of the problem. This article is the perfect complement to several of the others I've posted recently. It looks deeper into the problem of entrenched oligarchies that control the financial and political agendas.

Simon Johnson is the former chief economist of the International Monetary Fund (IMF). He is not afraid to speak plainly.

Summary:

The crash has laid bare many unpleasant truths about the United States.
One of the most alarming, says a former chief economist of the
International Monetary Fund, is that the finance industry has
effectively captured our government—a state of affairs that more
typically describes emerging markets, and is at the center of many
emerging-market crises. If the IMF’s staff could speak freely about the
U.S., it would tell us what it tells all countries in this situation:
recovery will fail unless we break the financial oligarchy that is
blocking essential reform. And if we are to prevent a true depression,
we’re running out of time.

25 March 2009

Think that headline sounds reactionary? This Rolling Stone article by Matt Taibi might be the most outrageous thing I've read yet on the financial crisis. Other articles I've posted here have given parts of this picture, but to see it getting worse when you were expecting things to improve is both infuriating and demoralizing.

If you listened to what Obama said in his press conference yesterday, this is exactly the kind of thing says he wants to stop by creating a new regulatory regime. In the meantime, the plundering continues. These guys are so dug in it will take atomic weapons and black ops to dislodge them from the levers of power.

While the rest of America, and most of Congress, have been bugging out about the $700 billion bailout program called TARP, all of these newly created organisms in the Federal Reserve zoo have quietly been pumping not billions but trillions of dollars into the hands of private companies (at least $3 trillion so far in loans, with as much as $5.7 trillion more in guarantees of private investments). Although this technically isn't taxpayer money, it still affects taxpayers directly, because the activities of the Fed impact the economy as a whole. And this new, secretive activity by the Fed completely eclipses the TARP program in terms of its influence on the economy.

...

When one considers the comparatively extensive system of congressional checks and balances that goes into the spending of every dollar in the budget via the normal appropriations process, what's happening in the Fed amounts to something truly revolutionary — a kind of shadow government with a budget many times the size of the normal federal outlay, administered dictatorially by one man, Fed chairman Ben Bernanke. "We spend hours and hours and hours arguing over $10 million amendments on the floor of the Senate, but there has been no discussion about who has been receiving this $3 trillion," says Sen. Bernie Sanders. "It is beyond comprehension."

...

In essence, Paulson and his cronies turned the federal government into one gigantic, half-opaque holding company, one whose balance sheet includes the world's most appallingly large and risky hedge fund, a controlling stake in a dying insurance giant, huge investments in a group of teetering megabanks, and shares here and there in various auto-finance companies, student loans, and other failing businesses. Like AIG, this new federal holding company is a firm that has no mechanism for auditing itself and is run by leaders who have very little grasp of the daily operations of its disparate subsidiary operations.

...

As complex as all the finances are, the politics aren't hard to follow. By creating an urgent crisis that can only be solved by those fluent in a language too complex for ordinary people to understand, the Wall Street crowd has turned the vast majority of Americans into non-participants in their own political future. There is a reason it used to be a crime in the Confederate states to teach a slave to read: Literacy is power. In the age of the CDS and CDO, most of us are financial illiterates. By making an already too-complex economy even more complex, Wall Street has used the crisis to effect a historic, revolutionary change in our political system — transforming a democracy into a two-tiered state, one with plugged-in financial bureaucrats above and clueless customers below.

Matt Taibiis a 39 year old investigative reporter who writes for Rolling Stone and other publications. He has appeared regularly on Bill Maher's HBO show.

09 March 2009

There's so much to be depressed, disappointed and angry about when you study the economy and how we got here, I thought I'd include something educational, positive and hopeful. You know, fair and balanced.

Hazel Henderson is a respected futurist, economist, environmentalist and promoter of new social ideas. Here's the link to her article on the Ethical Markets web site: The New Financiers

21 January 2009

A comprehensive set of eminently rational ideas about how to fix the structural problems in the economy. Some of them are much easier said than done, but all of them are worth pondering. Will we have the political will to seriously consider them?

05 December 2008

In the last few months I've been reading everything I can about the the current financial crisis, trying to understand the underlying causes as well as likely consequences.

It's tempting to see these events and the bailouts that have followed as simply the final outrageous chapter of the Bush Administration, but I'm concluding that it is an even bigger and more significant event than one would think based on the daily reporting on the subject. If it leads to a reform of the financial system, it may turn out to be the most significant thing that's happened to this country and the global economy in 400 years, with repercussions that will take a generation to play out, unlike previous "business cycles" of boom, bust, and recovery.

Hopefully, cooler heads will prevail. Some of them are coming to sensible conclusions already. Of all the articles I've read so far, these stand out as must-reads for perspective and for solutions, and I recommend them all:

The English historian charts the death of "Planet Finance" and the end of investment banks. But the more powerful insight is that these cycles of boom and bust are an inevitable result of the creation of banks and interest-bearing financial products over the last 400 years, which led to the disastrous expansion of the real estate market in what he calls "the age of leverage." A historical overview with this takeaway: without major changes to the financial system, it's going to keep happening.

If you just read one, read this. The author of Liar's Poker discovers the human story behind the Wall St. meltdown. The writing is so vivid that article reads like a screenplay for a very funny and horrifying movie you will want to see. It will have you laughing and crying at the same time, while shining a bright light on the attitudes of both the protagonists and the skeptics.

An investor as legendary in his own way as Warren Buffett has long warned of the dangers of unrestrained financial markets. Here he explains his concept of "reflexivity — the two way circular connection between market prices and the underlying reality" which makes all classic economic theory wrong and leads to policy errors on the part of both regulators and financiers that guarantee it will keep happening. Soros calls for new regulations that prevent overleveraging by financial institutions.

A meta-perspective by a Spanish theologian, who sees the crisis as inherent in capitalism itself:

The limits of capital lie in the limits of the Earth. That was not the
case in the crisis of 1929. The Earth's capacity for support was taken
as a given then. That is not so today: if we do not save the
sustainability of the Earth, there will be no basis for capital's
proposed growth. After having made labor's position precarious,
replacing it with the machine, now capital is liquidating nature.

26 March 2008

In his Gravity Medium blog John Proffitt posted a chart showing the increasing speed of technical innovation in communications media and used it to tweak public media professionals about the glacial pace of innovation in the system. (That was a good metaphor before global warming...glaciers are moving faster than public media these days.)

The post led to a discussion in the comments between me, John and Rob Paterson, who served as a consultant to public radio in the "New Realities" project — a fruitless attempt to kickstart innovation on the national level.

Innovation is good. Innovation is necessary. But as this discussion shows, even among those who agree on the need for innovation, it's easy to become bogged down in differing visions that may prove impractical or unproductive. I'm reproducing the discussion here so it is up a level in the blogosphere, visible and linkable. Most feed readers still don't give you access to comments.

If it seems like the world moves faster, technologically, with each passing year, you’re not imagining things.

Consider this chart:

Starting from its introduction, the simple telephone took 71 years
to arrive in just 50% of American homes. Think about that. An entire
generation was born, lived and died waiting for a telephone to arrive
in their home, and only half of them got it!

Even electricity took 52 years to reach 50% of homes. Cell phones —
that ubiquitous device most of us take for granted — took 14 years, but
the MP3 player took less than half that time.

Basic Internet access — the new omnimedia connection — took 10 years
to reach 50%, and in the early days it wasn’t even that much to talk
about. Today, high-speed Internet access is in well over 50% of homes
in the U.S. and average speeds are rising (though not fast enough for
me).

There are two lessons here I can see:

We cannot be transmitter companies (and indeed, we never were — we just thought we were because it was easier that way). Technology is a tool, not a purpose.

The public naturally innovates as better tools arrive for
information gathering, sharing and entertainment. We must innovate with
them to serve them; innovation must be built into our DNA.

What other lessons can you see in this chart?

A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be. –Wayne Gretzky

14 Responses to “Why innovation must be part of public media’s DNA”

Couldn’t
agree more with your conclusions, but the premise needs this comment:
one of the big reasons the “diffusion rate” of new technologies is
getting faster is the switch to increasingly efficient and ephemeral
technologies.

To illuminate the difference at its most extreme: establishing
telephone and electricity required massive investments in poles, wire,
a network of switching stations, generators, and the like. Cost?
Billions.

Diffusion of radio and television also required very large
infrastructure investments, and the adoption of consumer hardware that
was initially expensive and took 25 years to become cheap, even longer
to become portable. Cost? Also billions.

Mass diffusion of PCs required not only a substantial end user
hardware investment that has also taken over 20 years to ameliorate,
but ensnares the user in a technology and user interface learning curve
that still has not been completely removed as a source of friction, and now occurs along generational faultlines. Cost? Again, billions.

Establishing MP3 players was achieved via lightweight software downloads
to existing desktops over an existing network; after the “MP3 jukebox”
player concept was established, portability of the player functionality
was achieved by marketing an easy to use consumer electronics device
weighing a few ounces at “popular” prices. Cost? Tens to low hundreds
of millions.

So each innovation builds on a technology foundation adopted
mastered by previous generations of end users, and each becomes
lighter, easier, and cheaper — and therefore faster. Q.E.D.

The one adoption curve that is not illustrated here is ubiquitous
wireless Internet access. That sucker is not behaving according to the
rule, because it requires both technology innovations like WiMax, and a
new, very expensive infrastructure.

Agreed.
It’s almost Old Testament in its appeal — this begat that, and so on.
You can definitely see how the bottom half of the chart set the stage
for the top half.

You could also say the chart shows, especially in the last couple of
decades, a move from hardware and physical objects to software and
intellectual property or virtual objects. It’s not like the notion of
packaged media was revolutionary when the DVD arrived on the scene —
that was just a mashup of consumer video tape and the audio CD (or
LaserDisc).

I think the delay in the development/deployment of WiMax (or similar
technologies) is driven by several factors, not the least of which is
the chicken-and-egg principle (if I can call it that). Sure, there are
other difficulties like the physics of radio wave propagation and such.
But if I’m sitting at Sprint, trying to decide where to invest, do I
noodle around the edges and make more money from my existing customers,
or do I make a bold play for an unproven “next gen” technology that
will, as you point out, cost billions to develop and deploy? Go safe or
go risky? Hmmm. Well, no one every got fired for buying IBM…

In that respect, I think the truly revolutionary technologies — the
disruptive ones, the ones we don’t immediately understand — take either
truly revolutionary leadership or a groundswell of market demand to
appear. And that’s just plain rare. To me, there’s only 5 revolutionary
technologies on that chart, and that’s probably being generous.

Perhaps that’s one of the things that irritates me most about public
media’s intransigence in the face of an innovating media marketplace.
It’s not that the technologies themselves are prohibitively expensive,
nor are we being asked to invent the wheel without ever having seen
anything round. The models are all around us and the technology costs
are falling through the floor. The risks of innovation today are low.
The risks of avoiding innovation, however, are high and rising.

Lord help us (in public media) if WiMax or its cousins really do reach a point of virtual ubiquity in the next 5 years.

Good points - so bottom line we are seeing an acceleration based on layers of supporting infrastructure.

As well as the infrastructure - we are seeing an acceleration based
on user experience. For instance in banking thew idea of banking away
from the branch started with ATM’s, then telephone banking, then
online. As we all get more used to doing important things online such
as banking and shopping - it becomes easier to accept that we do all
things online.

As I type this, one of the great gadget dinosaurs of all time - my
wife is watching YouTube videos - she has become entranced by the fact
that she can find what she wants when she wants - if pub radio/tv was
to make her experience easier - she would jump.

The preconditions for a “Tip” are here. I think that most of the
base is in existence even for behaviour - so now convenience will be
the key.

The Wifi is I think less of an issue than making it easy to find and
share good stuff. But if there is another route to mass Wifi, that
would help.

How about this? Most stations are owned by universities that have
long distance pipes that connect the trunks. What if each station
started an Open Source Wifi/Wimax project - where it was the hub and we
all as “listeners/Viewers - added Merakis to cover the community?

Then the cost would be distributed and hence low. The Pipes would be
protected from the Big Guys as we would use the University net instead
of Verizon etc?

Could be a project that would pull the nation together in a new way - a new wave for democracy?

Hmmm…
Universities could potentially play a role, although not every
community has a university. But if the development of the Internet is
any cue, universities can definitely play a role here. Though started
by the Department of Defense, the academic community really built out
the Internet and turned it into an important communications medium.

Today, academics have access to Internet2 and are still innovating,
though mostly it’s bandwidth development with a few minor innovations.

The one thing I hope our innovators remember is the lesson of HD
Radio vs. WiFi (or insert your favorite tech references here). HD Radio
was developed in secret and the technology is owned by a single company
that charges out the wazoo for licensing. WiFi is an industry standard
held in trust by the IEEE and developed over time by a consortium of
companies that, while competing, agreed that a standard was better than
no standard.

Or how about this idea… What if public media companies developed —
wait for it — public media? We have towers and RF experience. Why not
participate with our communities to develop two-way wireless
communications services in the public interest?

A few of us thought of this 3 years ago and it has never left me -
think of all those towers and repeaters - then think of all your
listeners/viewers - surely this is enough real estate to be the
foundation of a great project that pulls us all together

Anybody who has made even a cursory attempt to follow the various
efforts to establish municipal Wi-Fi networks over the last five years
now recognizes the extreme difficulty in launching new network
infrastructure designed for public use — even when based on highly
efficient new technologies like WiMax that are designed to be
backward-compatible with the established base of Wi-Fi transceivers in
existing laptops. Think billions (again)…which Sprint was projected to invest
in its national WiMax network.

Anything that requires new consumer hardware to work (c.f. HD Radio,
satellite radio, smart phones, etc.) requires major investments from
the consumer electronics giants to have a prayer of overcoming the
friction of the adoption curve, and it had better be at mass-market
prices and be driven by absolutely compelling new applications that
fill basic needs, like email, voice communication, and text messaging.
And as the iPhone demonstrates it needs a user interface that’s better than
sex. Niche media alone is nowhere near powerful enough to drive
adoption of new hardware.

The one media propagation model that has succeed in the last few
years is integrated hardware/ software/ web services, notably by Apple in
the case of the iPod/iTunes player/iTunes Media Store, and by Microsoft
with the Xbox, where the new hardware is part of the integrated
ecosystem. Think hundreds of millions…

The last time anybody in niche media even partially succeeded at
this was AUDIBLE.com who in 1997-99 were first into the spoken word
niche with an integrated hardware/software/web service model. They went
though many changes but survived and recently sold out to Amazon, who
seem to have recognized the power of the integrated model with the
Kindle, and for whom the acquisition of Audible was a good fit since
Amazon serves niche markets and audiences of all kinds. Now we’re still
at hundreds of millions.

However, even the BBC with their billions of government funding
yearly can’t fully apply this model: the BBC Player is a software
download that uses existing computer and mobile hardware.

This is the future for niche media. From the Wikipedia profile of Audible:

In 2005, Audible launched Audible Air, software that
makes it possible to download (copy-controlled) audio books over the
air - wirelessly and directly to devices such as a smartphone or PDA.
This eliminates the need to download copy-controlled audio books first
to the PC or Mac and then transfer it to Palm OS, Windows, and Symbian
Mobile devices. Audible Air content updates automatically, chapters
download as required and delete themselves after they have been
listened to.

Public Media will do fine if it just leverages the new technologies and IP network infrastructure now in place
— something it is clearly NOT doing effectively enough now. Let the RF
transmitters age and die with dignity and focus development efforts where they
matter. The days when public media could command its own dedicated
spectrum are a relic of the bandwidth scarcity era for media, now over.
And any scheme that depends on proprietary hardware is DOA.

Stephen
— I was really thinking on a smaller scale. In my market — Anchorage —
there was an abortive attempt to do municipal WiFi last year. It died
when the commercial vendors that signed a deal backed out at the last
minute. They figured out there wasn’t enough money in it.

I actually don’t think that our existing tower infrastructure, even
peppered with WiMax gear, could get the job done in our area or most
metro areas. WiMax or its successors is much more likely to piggyback
on the cellular system and cellular towers, which are sprinkled across
the landscape.

But on a smaller scale, on the WiFi scale, what if we, a public
media company, partnered with our host community government and
deployed hotspots across the city and managed that infrastructure in
the public interest? I think that’s an idea worth exploring, especially
if the capital funds are covered by grants and the operating costs are
covered by ad revenue or minimal subscription fees.

I do NOT think we should develop technologies out of thin air and
wait for folks to show up. Others have suggested to me we use the
“extra” DTV bandwidth and sell it off for rented distance education
services, data services, etc. That’s crazy talk — it requires the
development of technologies that are parallel to existing tools and
would be used by the tiniest of niche markets.

And, sorry to say it, but the tremendous offer made by Mike Homer —
the Open Media Network — is great as an infrastructure service, but is
a bad idea from a player perspective. How many media players do I have
to download and use? Who’s going to keep developing and redeveloping
the player for new platforms? That was a great gift, but it was a gift
that made sense for about 5 minutes in technology terms.

So I’m with you, Stephen — we gotta be smart about this and not try
to invent our own technology ghettoes (a la HD Radio). But at the same
time, we also have to dream big. Let’s blend off-the-shelf technology
with true public service notions that the commercial space won’t touch.

I’m
all for thinking big, and a number of us in the PSP working group
attempted to do exactly that to conceive some kind of solution that
would work for all the current and future stakeholders of an expanded
public media system — one that included a broader coalition of
non-profit organizations as well as existing broadcasters.

Net result? We understood the potentials and the problems better,
launched a few ideas that stuck (like the ‘Public Media’ handle, for
example) but we were not successful in getting any uptake at all from
the system power centers, even as a demonstration project. So pardon,
me, but now when I hear someone say “dream big,” I have to recognize
the nature of the public media incumbents. See Calling the Game.

So nationally the prognosis is not promising. If you are talking
strictly about a local project, sure. IF all the local stars aligned,
IF the money was there when it needed to be, and IF there were solid
unfulfilled needs being fulfilled, it might have chance. How long it
would take to design, build, launch and get traction is a large, open
question. Public media companies are not in the infrastructure
management or (at this point) network development business. When you
talk about “managing that infrastructure in the public interest” I see
a lot of red flags flying over a giant minefield.

But if I generously assume you got past those challenges and the
project was wildly successful, it would certainly get noticed by other
local players in the public media system, and could have some influence
on the development of similar projects elsewhere. That’s the best-case
scenario.

On a national/international level, I do not think anything important can or will happen without a common platform
to organize the key functions of a better public media system:
increased public access via on-demand service, modular downloads,
archives, great searchable interfaces, more high-quality public media
content, aggregation of traffic in a way that makes appropriate
advertising viable, appropriate support for user-generated content and
social relationships, subscription (aka membership) support, and
critically — an underlying revenue-sharing business model that benefits
all the stakeholders — talent, producers, stations, networks, service
providers, and most of all…the public.

What public media professionals are supposed to be good at is
program selection and production, and providing a community service
around high level shared values. This technology and infrastructure
creation stuff is way off the competence map, and unless we
miraculously get good at it real fast, it just makes more sense to
focus on improving content and expanding service, and providing a first
class user relationship. That means using existing and emerging
standards and making full use of the online platforms already available.

I had a conversation with Mike Homer two years ago where he observed as a business matter,
Public Media was not obliged to share its users with the operators of a
larger platform, like Yahoo, AOL, GooTube, or any other. We could, he
said, operate our own platform online, just as we originally did in
traditional broadcasting. While theoretically that is still the case,
I’m pretty sure the moment of opportunity is, if not past, receding
from view at an increasing rate.

Sorry if I sound cynical about this stuff, but as you can see, there are reasons for it.

Stephen
— No need to apologize! Any cynicism you share is hard-earned through
efforts to work within the system. I was disappointed to see nothing
really come of the PSP idea myself. The PSP was presented at the first
IMA I attended and I was genuinely excited — it sounded to me like
there were some real thinkers in the system and after a bit of
wrangling we’d be on our way. Oh, well.

As for infrastructure stuff, I was definitely thinking on a purely
local scale. And it comes from the notion that we already operate some
infrastructure in the form of broadcast TV and radio
towers/transmitters. Some of us also have repeaters and translators. So
we already operate complex infrastructure in the public interest. Yes,
a WiFi project would extend our reach into a new medium with a totally
different model, but I think that would be good for us. The nature of
being a media company today cannot be constrained by a single tower
site and a single frequency setup in a one-way fashion — our
engineering capacity needs to morph just as the media technologies do.

Money? Well, that’s another matter. But you wouldn’t start such a
project if you didn’t know whether you could finish it. And considering
the dollars that always seem to be available for capital projects in
nonprofit land, I’d be surprised if the seed money couldn’t be gathered
if the value proposition is sufficient.

In any case, based on your comments and what I’ve seen at IMA and in
talking with others in the industry, I’m rapidly coming to the
conclusion that successfully fulfilling our missions as local media
companies (the stations, not the networks) will require localized
strategy and action. Waiting for some CPB marching orders to come down
from on high, telling us exactly what to do and how to do it is
nonsense. Conversely, national success (for PBS, NPR) will have to be
achieved at the national level with national scale — not while waiting
for the stations to green-light only the projects that aren’t
“threatening” to the status quo of locals.

Success for the “system,” it seems to me, will only come when
national and local entities agree to disentangle themselves and develop
new strategies based on the new economic world we find ourselves in.
There’s too much history and too many conflicting purposes for us to
all go forward together in harmony.

Well, now *I* sound cynical! But I don’t really feel that way. I
still believe we have opportunity here. Do we have the right leadership
to pull it off? Ask me again in six months. By then, I’ll at least know
about my own company.

I am in a way with both of you. Stephen - the platform is the key
and the more open the better or the more accepted - go where the people
are.

iTunes, YouTube etc I think are essentials.

But I also think there is an opportunity to act locally to spread
Wifi - now how this has been attempted to date as a single provider
with a revenue based business model but as a network of users who mesh
their coverage for all with the station as the cheer leader.

Rather than plan a lot for the whole system - too much inertia - why not act locally as a start?

That’s a fine vision, Rob, but I don’t see how it can work technically.

The current 802.11x standard for Wi-Fi has a deliberately limited
range. Once you get outside of Manhattan densities (i.e., everywhere
else), even if you could propagate the new hardware needed to create a
real “mesh network,” the coverage map would have more holes than swiss
cheese.

The kind of network effect based on coordinating distributed service
users you are talking about is essentially a description of the P2P
networks.

They are asynchronous and global and based on software using
existing hardware, which overcomes most of the structural problems. But
even these networks have difficulty dealing with infrequently used
content and real-time delivery, and require shoring up by conventional
unicast content delivery mechanisms to be reliable. They work best for
mass media where there are plenty of peered users.

The vision of local users banding together to acomplish something
could also be done via specialized social networks using the existing
IP infrastructure. That’s what social media toolsets like NING are
designed to accomplish.

Sorry, but I have to conclude that trying to use FM transmitters,
with or without Wi-Fi, for purposes like these is as misguided as HD
Radio. We have a flexible (pseudo) mesh network called the Internet. We
are nowhere near using it to its potential for public media.

05 March 2008

Continuing the conversation with John Profitt at Gravity Medium re The IMA Impasse:

If you were going to start a locally-focused public media company today — without the overhead of gear, people or ideas from the old public broadcasting world — what would that look like? Is that one person and a web service? Is that a community site organized by one person but handled by volunteers? Or are geographically-centric community services passe, and we should instead focus on topical verticals, like the HoS model?

John,

The way you pose this question is revealing. Correct me if I'm assuming too much, but saying you want to 'start' a 'locally-focused' 'public media company' implies you want to stay in Anchorage, and that some part of you is an entrepreneur as well as a public service media professional.

Perhaps it's because of your local radio background, but to use a photographic metaphor, you seem to be zooming in and focusing your attention on a geographically limited area as the target of a web service. Turn the camera around and open up the lens to wide angle, and consider the media, services, communications networks and technical infrastructure environment that surrounds your geographic area. Even though you may want to create a locally focused service, this is the underlying digital ecosystem that defines the set of possibilities and limitations you have to operate within.

One thing that struck me from the very beginning when I started to go to Internet music conferences in 1999, was that absolutely everyone was talking about business models that could "scale." This almost always meant free services.

Success was defined by an innovation that could be virally transmitted and grow to large numbers of users in "Internet time." This ability to scale rapidly would fuel and enable advertising-based business models. These prejudices are no less true today in the era of social networking, as several commentators have pointed out recently in articles like Kevin Kelly's "Better Than Free."

The problem is that mass usage paradigms do not translate into viable business models for niche services.

All of public broadcasting with the exception of the big NPR news shows and a few others is a niche in the media world. Geographically defined, locally focused services are also another niche in Internet logic.

A locally-focused service like Craig's List, for example, can only scale via duplication and syndication to multiple geo-niches. So if you find a solution to a local need, it may have application on a larger, more extended scale.

The other end of the geographical scale is to use the tools and resources of the digital ecosystem to build a what you call a "topical vertical" as we have done with Hearts of Space. This approach provides the same service to users world-wide. Theoretically this is the best way to build out a "global niche."

[In fact, HoS now has customers on every continent, though they are still few in number because we do not have a corresponding history and broadcast presence on those continents, and we still charge a subscription fee for full use of our service. We are too small to be viable with advertising.]

The question you pose of whether to pursue a local vs. topical service is one to be decided by personal preference of the service creators, along with a realistic assessment of resources and funding potentials, not any yardstick for measuring either absolute value or opportunity cost.

The one point I would make (the same one I was trying to make to the public media establishment at the previous IMA conferences) — is that imagining and building larger scale aggregated services for public service audio and video programming (and related multi-media and text content) presents literally a "once in a lifetime" opportunity to secure and expand the potential public service and the financial base of the entire public media network.

To see this opportunity languish, be ignored or not even recognized, is to me a shocking failure of this generation of public media professionals. When compared to the generation that created PBS and NPR, the network of local affiliates, the distribution infrastructure, programs and policies that built the existing system during the decades from the early 1960s to the 1990s — it is a very sad performance indeed.

The brilliance, the courage, the insight and the sheer ambition of the creators of the Internet and the services that have grown and flourished there — the ones like Wikipedia that we admire and cite for inspiration and guidance at public media conferences — is nowhere to be found these days in public media. This despite seven years of effort by the IMA, and dozens of articulate spokespersons for systemwide cooperation to seize the opportunities presented by the Internet to broaden, deepen and secure the core mission of public media.

So in my opinion, you won't find the answer to your question by tinkering with local vs. topical service model distinctions. The answers are discovered over time by those who plunge into digital media and web application development, understand deeply the nature of networks and the potentials of programming languages, communication protocols and IP technologies — and then reconcile them with an insightful understanding of public needs and the public good, by creating innovative new applications and services.

If you read the origin stories of successful web sites, applications and services, you will find that the creators and designers of these innovations were almost always "skilled mavericks." They understand the nature of networks, the wisdom of crowds, the longing of individuals for better, more efficient, more enjoyable online experiences. They are dissatisfied with the status quo. They find a need and design and build a solution using the tools available.

From what I know about you, you are adequately steeped in the values of public broadcasting, and reasonably up to date on the state of Internet technologies and culture. So my advice is not to worry about what you are going to do for public media in Anchorage or elsewhere, but to jump into the new game and onto the field in play. That field is online. It's a magic place where new things are possible and even welcomed. Imagine that! Compare.

Pack light. Just bring your public media values with you, and the answers will present themselves.

27 February 2008

This post was originally written as a comment to John Proffitt's review of the recent Integrated Media Association (IMA) conference at Gravity Medium. John was brave enough to pose some hard questions, and I am disillusioned and cranky enough to try to respond to them.

John writes:

In my (current) view, IMA appears to be at an impasse. We seem to have reached a point where integrated media advocacy has given out, where recommendations and demonstrations fail to move our organizations to meaningful action.

To date, IMA has been effective at putting the online services question on the table within public broadcasting and has done so eloquently and repeatedly. But for all the work completed, no significant sea change has yet arrived. Meanwhile, the house of public TV is on fire, we’re losing audience to a fracturing media world across the board and new players (like Wikipedia and others) have stolen “our” web traffic and possibly our raison d’etre.

I comment:

After six or seven years of trying to push the river, I’ve regretfully come to believe that the forces that control the legacy public media system — both public television and public radio — are simply too entrenched, too defensive, too scared, and too innovation-phobic to respond meaningfully to the challenges of the digital era.

It’s a pious, slow-moving culture that has always been satisfied with less. Unluckily, we live in a time of disruptive forces that demand clear, courageous and timely action on the part of all media organizations.

Sure, there will be some forward looking moves made and some low-hanging fruit picked (like the Podcasting initiative) — especially by the leading stations — but the ball has been ignored or dropped at the network and system level time after time, even after the extent of the digital challenge became clear. There is little evidence that sufficient positive forces are now acting within the system to change this. Negative forces are not enough.

Cassandra-like warnings from me and others at various pre-IMA study groups and IMA conferences have proven to be slightly slow to arrive, but it is no longer in doubt that public radio will face a longer, slower, perhaps more painful version of the erosion and fragmentation of usership that has already disenfranchised public television, with the inevitable downward spiral of support from listeners, underwriters and funders.

It looks like the system will get hollowed out from within by slowly cutting staff, production and services. In another ten years it could resemble a ghost network populated by aging ‘tentpole’ programs and whatever else has already built a national audience and remains a viable part of daily news & information service, with the surviving stations being little more than network retransmitters with various flavors of local toppings. Wait, that's now...

The few stations that remain viable centers of program production and innovation have the best shot to adapt, but it should be worrisome that some trend spotters now see users wanting to support their chosen program brands directly, making all intermediates vulnerable unless they add value or own the program brands outright. This is Your Disintermediation at work.

At the network level, it seems that NPR, PRI and APM and their television equivalents are focused on reproducing the same balance of power in digital distribution and underwriting that obtained in the pre-digital era. I wish them luck as they divide an ever-shrinking pie.

In the endgame, they will be forced to act to protect their own franchises, so you can expect an era of increasingly hardball system politics as these aggregators and national network brands try to detach themselves from the drag that the stations exert on their own ability to respond to digital media opportunities. As a result, the large group of small and medium sized stations and state networks will be left to twist in the gathering winds on their own, while the major stations and the smallest community stations will adapt by degrees to the new realities of the digital network era.

John is quite right to point out that all the major initiatives promoted by the IMA to setup meaningful public media system collaborations, create significant new services, and see them funded at a level that gives them a snowball’s chance of surviving in a globally flaming mediascape — have utterly failed to get traction. At best, a few basic technical projects like metadata standardization have been started, while the challenge is to re-invent basic business and service models and reorganize the system from top to bottom.

The call to expand the IMA to include the larger public media sector may be a path forward for IMA, but it is even more difficult and uncertain. It's like trying to save a marriage by having a child — the core members can't pull themselves together effectively, so the solution is to involve outsiders and expand the scope of the organization, which makes it an order of magnitude more difficult to accomplish.

Face it folks : it ain’t gonna happen.

The IMA isn’t going to accomplish anything significant because it is fundamentally powerless. The moment of opportunity has passed — it needed to happen in 2004-2005. The IMA turned into an excellent conference but despite worthy efforts failed to provoke anything truly important within the system.

After attending the IMA every year since its inception, this year I opted out and instead attended a Music Technology conference here in San Francisco.

The music industry’s problems are legion and the subject of daily international press. You would expect a conference like this to be as depressing as IMA sounds per John’s report, but in fact it was the reverse. The rooms were humming with smart, engaged, activists of all ages working to move the digital music experience forward.

[Note that this is all happening in the context of a music copyright regime that has for years refused or blatantly overpriced the licenses needed for digital services to offer the innovations necessary to wean the public off physical media. That’s one structural problem that public media does not have when it originates its own programming.]

It is not my wish to further depress my many good friends and colleagues who continue to work in public broadcasting, but I believe it is time to take this discussion to its sadly obvious conclusion:

If you care about the values of public media, get out of public broadcasting and work on achieving them elsewhere.

26 November 2007

Just before Thanksgiving, Jaron Lanier published an op-ed piece in the NY Times titled "Pay Me for My Content." Part mea culpa, part advocacy, Jaron is tired of waiting for the Internet revolution to provide a living for artists and other content creators. The Hollywood writer's strike may have occasioned it, but the piece reveals a deeper level of frustration and idealism that would not be satisfied by an incrementally better royalty deal with the studios or record labels.

Jaron is a friend with whom I have shared both musical and social time. We've argued and discussed some of these issues before, so I wrote him this:

Re your recent NYTimes Op-Ed:

As you know, we've been getting paid — and paying creators — for our online content since 2001. Practical mechanisms to secure payment were available even then. We used a simple, relatively insecure, but effective one created by the "adult" industry for the first version of our service from 2001 to 2005.

By 2005, things were getting more sophisticated. We built a 2nd generation site around a service whose slogan at the time was "resources for media monetization," since changed to "powering new media." As you may also know, there are now a number of companies in this field who provide various services to authenticate, authorize and charge users for content. Most of them use the much-reviled Microsoft DRM, but there are others who secure and charge for streams and use non-DRM methods to secure downloads.

Thus I'm not sure what you mean when you say "We could design information systems so that people can pay for content." The tools are already there; what is lacking is the will, which I gather is the area your piece was intended to stimulate, and the entrepreneurial culture that goes along with it among creatives.

The entrepreneurial class online is dominated by venture capitalists and technologists, and the predilection for free content is based on a barely concealed quest for "scale" which requires elimination of "friction." Ironically, it's mass media in drag with free content as bait. In some cases aggregation makes up for value lacking in the content itself. Thus the natural evolution of advertising as a business model.

In your piece you did not mention the inhibiting effect of existing copyright regimes in the creation of new business models that might benefit creators. It is now obvious that many of the entrenched media interests have shot themselves in the head in their effort to maintain their old business models, pricing and market share. They never seem to learn from history.

For example, we still cannot legally sell downloads of our programs due to copyright and licensing restrictions on music, despite the fact that we are ready, willing and able to pay creators and publishers directly if necessary for these sales. They are more interested in maintaining control than effectively monetizing their existing catalogs.

Despite all this, there are numerous examples of niche media publishers and service providers online who are succeeding to one degree or another in supporting their enterprises with paid content instead of advertising, or some combination of both. Hearts of Space is one of them.

As a class I liken them to niche magazines and periodicals of the 20th century. Optimally, if they get the cost of production and delivery vs. benefit for the reader/user equation right, they can sustain themselves for a long time. No one gets rich. In the end it's a "satisfaction" economy.

I agree with you that advertising as the exclusive revenue model is not only culturally depressing — the bigger problem is that there are many niche artists, publishers and service providers who due to their size or the nature of their content, could simply never make an advertising model sustainable. They can, and do, get some incremental income from wide angle opt-in services like Google Ads, but this is just beer money. When you say "earn a living online" I assume you are looking for a sustainable income model for creatives.

In the early days of Jim Griffin and John Parres's Pho List discussion group, these questions were debated interminably without any clear resolution. As a niche content provider, I took the same side you do, which is sometimes called enabling "a (musician's) middle class." The only difference is that I would extend it to all creatives, as well as niche publishers and other value-added packagers, editors and resellers (like HOS).

I believe if you look more carefully you'll conclude that the real impediments are not technical, but (with some exceptions) because most creatives are not comfortable becoming entrepreneurs. Even among my colleagues in Public Broadcasting, the entrepreneur gene is very thin on the ground and major opportunities to charge "appropriately" for their high quality content have been left on the table.

For various reasons, these creative people lack the technical skills, the culture, and the internal motivation to build new businesses without clear models and established services to build upon. They like the limited responsibility that comes with a job or the pure artist paradigm; and from what I can see, many of them enjoy their victim status rather too much to give it up.

The creators of the content are the owners of the company. The writers,
actors, directors -- they are the owners. They have a direct,
equity-based economic stake in the company's success. They get paid
like owners, and they act like owners.

So to paraphrase Jaron's conclusion, we need to step up as well as grow up if we want to make a living online.

04 April 2007

Royalty rates for online music have always been a complicated issue for me. I can see the side of the rights holders and performing artists just as well as that of the "casters," both terrestrial and web.

I have a foot in both camps: in addition to being an online music service provider/webcaster and thus paying digital transmission royalties since 2001, I had 17 years experience in the record business as a producer and co-owner of an independent label that released almost 150 albums. In that capacity I signed a lot of royalty checks. I like paying royalties. It makes me feel like an honest member of the arts ecosystem, a proper "cultural citizen."

The recent CRB decision to ramp up the rates for digital transmissions have caused another outcry from the webcasting and broadcasting communities, including NPR and satellite radio. It's understandable that everyone in the broadcast business wants to operate with the lowest possible costs, but copyright has always been about finding the proper balance between competing interests.

The bigger picture is that we began webcasting in the 1990's with a distorted, biased music royalty system that favored music publishers and had been subject only to politically driven reforms and very limited competition since the 1920s. So the system that is now painfully being born for royalties on digital transmissions started from unfair and had nowhere to go but up. The more you know about the history of the music business, the more certain you will be of this. Nevertheless, the current system still has a long way to go before we see a truly rational scheme for music royalties.

New York attorney Bennett Lincoff has been dissecting this issue brilliantly for years. To my knowledge he was the first to call for a "unitary" scheme for music right in 2002; he won't be the last, since it's the only way to really make it work. Even U.S. Registrar of Copyrights Marybeth Peters called for similar (but more limited) reforms in 2005. I'm signatory to a new effort calling for this kind of solution that includes many of the progressive voices on the Pho conference email list including Jim Griffin, Gerd Leonhard and others. What we have here, Pogo, is a policy gap.

Bennett Lincoff's most recent paper describes a new system that is astonishingly simple on the licensing side but still fairly complicated on the payment side. Yes, it's just a proposal, yes, it would be highly controversial, and no, it is nowhere near being adopted; but it would be a MONUMENTAL improvement over the current system, which was created for the physical product era and makes less sense every day in the wake of a worldwide digital media network.

The proposal demonstrates that if you free yourself from historical precedent and address the problem directly, fair and feasible solutions can be designed. Bennett lays this all out with admirable clarity in lucid, but not overly lawyerly prose; you will find studying it very rewarding if you really want to understand the stakes of the problem and the solution.

As flawed as the existing DMCA legislation is, it at least recognizes and begins to repair two structural deficiencies in the old music royalty system that operate to the advantage of incumbent radio and TV broadcasters — lack of payment to owners of the sound recording, and lack of payment to featured recording artists as performers.

Most people do not know that (after costs) the royalties SoundExchange collects on digital transmissions are divided 50% to the owner of the sound recording, 45% to the featured recording artists/performers, and 5% to the musicians unions. None of it goes to the music publishers, songwriters and composers, who are paid via a separate system collected by ASCAP, BMI and SESAC in the U.S.

This is a long overdue correction that directly benefits performers, independent musicians and labels, and for that reason alone I support it. Europe has been way ahead of the U.S. on this; rights collectives like GEMA in Germany have collected and disbursed payments to all rights holders in a combined system for years.

If you want to understand the rights holder's side of the issue I recommend the interview BRIAN ZISK of the Future of Music Coalition did with JOHN SIMSON of SoundExchange in Royalty Week. (.pdf) Simson is a very clear, very practical guy as you will see from what he says. One thing he mentions that is sure to be even more controversial is that SoundExchange and the RIAA intend to fight to change the law as it applies to legacy broadcasters so that ultimately...the rates are uniform.

This means that terrestrial broadcasters would no longer have the 'carve-out' they've enjoyed since the 1920's, where they pay only the music publishers, songwriters and composers for use of recorded music. With the radio industry already under pressure from changing advertising models, you can bet the screams about this will be much louder, and the lobbying from the NAB should be nothing short of tactical nukes.

Anybody with even a passing understanding of the history of music royalties knew that the initial rates and policies for digital transmissions under the DMCA were just to get started and would not last. Effectively, webcasters have been paying below minimum wage for the use of music.

There's no doubt that the artificially low rates did support a great deal of innovation online, and today listeners enjoy tens of thousands of free webcast services as a result. But the low rates have come at the expense of the creative community, and allowed both radio stations and web-only services to put off the hard work of creating "real" business models to support their services. This is exactly the same issue I've been nagging my public broadcasting colleagues about in earlier posts here and here.

Even so, the CRB-proposed rates are supposed to ratchet up gradually and there should be enough time for serious webcasters to phase in the changes they need to make. Of course, they will do everything they can to fight and delay the actual application of the CRB decision, which is what is happening right now.

Are the proposed rates fair? Perhaps they are — in the long run. No doubt they would be disruptive to the status quo, so they may need to be implemented more gradually, or we may need additional policies that help existing webcasters through the transition to a more equitable rate.

As far as Hearts of Space is concerned, we are a "new subscription service," not a "non-interactive webcaster," and are subject to a slightly different set of rates and policies. Nevertheless, we ran the numbers as percentage increases immediately in the wake of the CRB announcement and found that we could probably absorb a doubling of the current rate before we'd have to raise our prices. After that, they would go up incrementally — but not enough to dissuade anyone who really wanted access to our material. The "user value decision" to pay for content is more complex than just the price.

My point is that if you have rational business model to start with, paying more — even multiples more — for your basic source material is not a major problem. After that, increased rates are likely to be reflected in higher end user prices. To me this is inevitable and desirable, since it means that significant new income streams will go to the musicians and small labels on whom Hearts of Space largely depends. By "significant" I mean capable of sustaining continued activity by those artists and labels. A SoundExchange check that won't buy a pizza dinner for two is not going to cut it.

What about the "innovation" argument? Clearly, today's low rates and liberal policies have supported this. If you look across the range of webcasting services online today, you'll find an array of free and paid services supported by hosting providers ranging from ordinary ISPs to specialty webcast providers like Live365.com, MySpace and YouTube. You'll find innovations in community features, recommendation engines, and customization options. Would these features exist if royalties were higher? I think they would have taken longer to become commonplace, but would still have been developed because they serve real needs for end users.

The majority of these webcast services raise subsistence-level income from placement of text ads by Google or banner ads from various advertising networks. A few of the more established and popular services like SomaFM also raise money via the public broadcasting model of direct appeals for user donations. And public broadcasters have extended their existing business model and fundraising techniques to the web as well.

These two business models are better than nothing, but with usage now spread out across tens of thousands of webcasters, it's obvious that only the most popular ones at the steep head of the Long Tail will be able to raise enough money to survive this way. Ultimately webcasters will have to consider other ways of monetizing their services.

This is the sticking point and the heart of the challenge: to add enough value to a free service to build substantial traffic and thus appeal to advertisers, OR, to charge users access fees they consider fair and are willing to pay.

The sooner webcasters absorb this realization and start working to achieve it, the sooner reasonable amounts of money will start flowing to the musicians, labels, and other rights holders who deserve it. At worst, it will force the more marginal web players to get serious...or get out.

I realize that sounds hard, but if you're a musician or a niche label trying to make a living, it's a very real issue. And as the old product-based music business morphs into a licensing-based business over the next several years, it will increasingly be the case for everyone who makes recordings.